How to use the personal loan calculator
To use the personal loan calculator, you’ll need to enter some details about your loan. These are explained below:
- Borrowing Amount - The amount of money you are looking to borrow from a lender under a personal loan agreement, including any fees included in the loan.
- Interest Rate - This is the interest rate the lender will apply to your personal loan, and is used to calculate both the total amount of interest you will pay over the loan period and your scheduled repayment amount. Personal loan interest rates can be fixed or variable: If you have a variable rate of interest, you will have difficulty accurately determining your payments over the life of your loan.
- Loan Term - The length of your personal loan as dictated by your loan agreement. The shorter your loan term, the higher your scheduled repayments will be. Your loan term is important as it will allow you to accurately calculate your monthly, fortnightly, or weekly payments through an Annual Percentage Rate (APR) calculation, provided you are working with a fixed interest rate.
- Establishment Fees - Any upfront fees charged by the lender when creating the secured personal loan agreement. Establishment fees are included in the calculation for your repayments to provide a more accurate total loan amount.
Once you have filled in your personal loan details, simply click ‘See My Repayments’ to view an estimated repayment amount.
You can then select Monthly, Fortnightly, or Weekly repayments to see what your repayment amount will be at various frequencies.
If you are calculating a personal loan with variable interest, you will only be able to calculate the current repayment amount based on the current rate of interest.
Personal loan repayment calculation
The personal loan calculator uses amortisation calculations to estimate interest and repayment amounts. Amortisation is the method of splitting payments between interest and the principal amount to repay the full amount in regular, consistent payments:
- When you make your first repayment on your personal loan, a greater portion of the amount will go toward repaying the interest.
- As you continue to meet your repayments, the portion of interest paid on each amount will decrease, and the portion paid on your principal amount will increase.
When you calculate your personal loan repayments using this formula, it allows you to see what your regular repayments will be, and also allows you to estimate your savings should you choose to repay a portion of the loan early.
Personal loan repayment formula
The simple formula for calculating personal loan repayments is: Loan Amount / Discount Factor.
The complexity of the calculation is in determining the discount factor, which is calculated by dividing the interest rate of your loan by the number of payments per year (12 for monthly, 26 for fortnightly, or 52 for weekly) to first obtain the Periodic Interest Rate.
The discount factor formula on your personal loan is expressed as: (((1 + i) ^n) - 1) / (i (1 + i)^n)
- n = the number of repayments
- i = the annual interest rate
Personal loan calculator examples
In the example below, we’ll look at an individual wanting to borrow $20,000 to finance a honeymoon and holiday.
As the borrower doesn’t yet own a home, they agree to an unsecured personal loan of $20,000, and they agree to an 18% variable interest rate and a monthly repayment term of 5 years. Assuming their variable interest rate stays the same for the term:
- n = 60 (12 repayments per year for 5 years)
- i = 0.015 (where the interest rate (18%) is divided by the number of annual payments (12) to provide a decimal representation of the interest rate)
- Using the discount factor formula above, we can calculate the discount factor: ((((1+0.015)^60) - 1) / (0.015(1+0.015)^60)) = 39.3803
- The discount factor is then calculated as 39.3803
- We then take our loan amount ($20,000) and apply the Loan Repayment Formula, dividing the loan amount by the discount factor. This will provide the monthly repayment estimate: 20,000 / 39.3803 = 507.868
- We then round this figure out to a double-digit decimal amount. The monthly repayments on this loan will be $507.87
If you want to quickly calculate your repayments without creating your own spreadsheet with the above calculations, you can use the personal loan calculator on this page.
Example of personal loan repayments
Other Money.com.au Calculators
Calculated repayments on a personal loan and want to see other types of loan or interest calculations?
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