How to Calculate Interest and Monthly Loan Payments


Everyone understands the significance of selecting the best personal loan. Aside from comparing different personal loans in the Philippines, it is very important to know how these personal loans are computed. Borrowers must consider both the interest rate and the monthly payment when applying for a loan. Knowing how much it will cost you to borrow money will allow you to evaluate if you are able to pay the principal plus charges and interests. Be a savvy borrower. Gather all the necessary information before giving your loan application to a loan provider.


A personal loan is determined by calculating the interest or monthly payments which are also known as amortization or installment of the loan. Borrowing becomes more expensive for you as the interest rate rises. If you want to know if you can afford to repay your loan every month, then look at the monthly payments. Know how to calculate the monthly payments to determine if your monthly income is enough to cover the monthly repayments.

Amount of Interest on a Personal Loan

Interest refers to the cost of borrowing money that is paid by the borrower. Or it is the fee charged by the lender for using its funds. Moreover, it is the profit made by the lender as a result of granting the borrower a loan. It is important to understand the aspects that determine how  much interest you pay. Before learning how to compute personal interest, learn about the principal, loan term, and interest rate. The loan principal refers to the amount borrowed from the loan provider. The interest rate is the percentage of the principal amount that the lender charges the borrower as interest.

The greater your principal, the greater the interest you must pay. The loan term, also known as the tenor, is the amount of time it will take you to repay your loan in full. It is usually expressed in terms of months or years. Take note that longer terms result in lower monthly payments but you have to pay higher interest charges over the loan’s life. Also, shorter terms will result in you paying higher monthly payments but lower interest payments over time. The higher the interest rate, the greater the cost of borrowing. Check out the website for more information.

Sean Martin D. Plantado, head of customer service for, do not recommends  buying a gadget on credit for which you will pay more than 20% of your monthly income each month.

How Is Personal Loan Interest Calculated?

Use an online loan calculator for a quick and accurate method to calculate interest. But if you want to calculate by hand, here is the formula: (Annual interest rate x Number of payments) x loan balance = interest. 

Personal Loan’s Monthly Payment

This is a fixed amount that the borrower must pay every month until the loan is fully paid. The monthly payments cover both the interest and the principal on the personal loan. Calculating a loan’s monthly payment is difficult for anyone who isn’t a math whiz. If you find it bothersome, you can use a personal loan calculator to save time and your sanity. 

Using a Personal Loan Calculator

A personal loan calculator can assist you in making important decisions before applying for a loan. It is a very useful and convenient device to use when looking for a personal loan in the Philippines. Based on the information that you enter, it calculates the monthly repayments of your loan. 

How Loan Calculators Operate

Just enter the information you want such as the amount you plan to borrow along with your preferred repayment term. Then, the calculator computes the amount that you must pay each month or the maximum amount you can borrow. Loan calculators are found on the websites of  loan providers. This allows you to calculate how much you can borrow based on your monthly income or how much you will pay every month based on your loan amount and term. It is simple and fast to use, giving you the desired information at once.


It is simple to comprehend how a personal loan is calculated. The bank gives you access to its bank’s online calculator. Just don’t forget, the results of online personal calculators are only estimates. Once your personal loan is approved, the lender will provide you with the actual computation and loan amount. Keep in mind that loan providers do not offer the same interest rates, select what is best for you. Always be an informed borrower.

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