1. What is the Loan Balance Formula?

The loan balance formula calculates the remaining amount owed on a home loan after a certain number of payments have been made. It accounts for the principal amount, interest rate, total loan term, and payments made.

2. How Does the Calculator Work?

The calculator uses the loan balance formula:

Where:

• \( B \) — Remaining balance
• \( P \) — Original principal amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in months)
• \( p \) — Number of payments already made

Explanation: The formula calculates how much principal remains after 'p' payments by accounting for both the interest and principal portions of each payment.

3. Importance of Loan Balance Calculation

Details: Knowing your remaining loan balance helps with financial planning, refinancing decisions, and understanding how much equity you've built in your property.

4. Using the Calculator

Tips: Enter the original loan amount in RM, monthly interest rate as a decimal (e.g., 0.0042 for 5% annual rate), total loan term in months, and number of payments already made.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly?
A: Divide the annual interest rate by 12 (months) and then by 100 to convert from percentage to decimal.

Q2: Does this account for early repayments?
A: No, this assumes all payments are made exactly as scheduled. Early payments would reduce the balance faster.

Q3: Why is my balance not decreasing linearly?
A: In the early years, more of each payment goes toward interest rather than principal (amortization effect).

Q4: Can I use this for other types of loans?
A: Yes, it works for any amortizing loan with fixed monthly payments (car loans, personal loans, etc.).

Q5: How accurate is this calculation?
A: Very accurate for fixed-rate loans. For variable-rate loans, it's accurate only if rates haven't changed.