1. What is the Loan Interest Formula?

The loan interest formula calculates the monthly interest payment based on the principal balance and annual interest rate. It's fundamental for understanding loan repayment schedules in Philippine Peso.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest payment (PHP)
• \( P \) — Principal loan balance (PHP)
• \( R \) — Monthly interest rate (annual rate divided by 12, as decimal)

Explanation: The formula calculates the interest portion of a monthly loan payment by multiplying the outstanding principal by the monthly interest rate.

3. Importance of Interest Calculation

Details: Understanding monthly interest helps borrowers evaluate loan affordability, compare different loan offers, and plan their finances effectively.

4. Using the Calculator

Tips: Enter principal balance in PHP and annual interest rate in percentage. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this for simple or compound interest?
A: This calculates simple monthly interest. Most loans use compound interest, but this gives a basic estimate.

Q2: How does payment frequency affect interest?
A: More frequent payments reduce total interest paid by decreasing the principal faster.

Q3: What's a typical interest rate in the Philippines?
A: Personal loans typically range 10-20% annually, while mortgages may be 6-10%.

Q4: Why is my actual payment higher than this calculation?
A: Actual payments include principal repayment and possibly fees/insurance not reflected here.

Q5: How can I reduce total interest paid?
A: Make larger payments when possible, choose shorter loan terms, or negotiate lower rates.