Question 1

What is the difference between fixed-rate and declining-balance loans?

Accepted Answer

In a fixed-rate (equal payment) loan, your monthly payment stays the same throughout the term, with a higher proportion of interest in the early payments. In a declining-balance (equal principal) loan, the principal portion is fixed each month, so the total payment decreases over time. The total interest paid is lower with declining-balance, but early payments are higher.

Question 2

How is the monthly loan payment calculated?

Accepted Answer

The fixed-rate monthly payment formula is: M = P x r x (1+r)^n / [(1+r)^n - 1], where P is the loan principal, r is the monthly interest rate, and n is the total number of payments. For example, a 1,000,000 loan at 3.45% annual rate for 30 years has a monthly payment of approximately 4,462.

Question 3

Is it worth making early loan repayments?

Accepted Answer

Whether early repayment is worthwhile depends on the remaining loan term and repayment method. For fixed-rate loans, interest is front-loaded, so if you have already paid more than half the term, the interest savings from early repayment may be limited. For declining-balance loans, the earlier you repay, the more you save. Consider your investment return rate versus the loan interest rate before deciding.

Question 4

What types of loans does this calculator support?

Accepted Answer

This calculator works for mortgages, auto loans, personal loans, and any other loan that uses fixed-rate or declining-balance repayment. Simply enter the loan amount, annual interest rate, and loan term to calculate.

Loan Calculator

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