How to Calculate Interest and Monthly Payments on a Personal Loan

Published: April 23, 2021 | Updated: May 6, 2021 | Posted by: Venus Zoleta | Personal Loan


how a personal loan is calculated | Moneymax

Everyone knows the importance of choosing the right personal loan. But aside from the lender’s reputation, what else should you be looking into when comparing different personal loans in the Philippines?

You should understand how a personal loan is calculated. The interest and monthly payment are two critical factors that borrowers must consider before applying for a loan. Of course, it helps to know how much it will cost you to borrow money from a certain lender, and whether you can afford the monthly payment or not.

How a Personal Loan is Calculated

A personal loan—or any type of loan for that matter—is calculated by computing the interest or monthly payments (also called amortization or installment) on the loan. What you should compute for depends on the information you need.

For example, to find out how much it will cost you to borrow money from a certain lender, you should calculate the interest on the personal loan. The higher the interest you’ll pay, the more expensive borrowing becomes for you.

On the other hand, if you want to know whether you can afford to repay a loan every month, then you should look into the monthly payments. Learning how to calculate the monthly payment lets you know if your monthly budget can cover your loan repayments.

What is Interest on a Personal Loan?

how a personal loan is calculated - how to compute interest

Interest is a fee that the lender charges you for using its money. It’s what you pay back on the loan, usually every month, on top of the borrowed amount. For the borrower, the interest is the cost of borrowing money. For the lender, it’s the profit they get from granting the borrower a loan.

Before learning how personal loan interest is calculated, it’s important to understand first the factors that affect how much interest you pay: principal, loan term, and interest rate.

  • Loan principal is the amount you borrow from the lender. The higher your principal, the higher interest you’ll have to pay.
  • Loan term or tenor is the length of time it will take you to fully repay your loan. It’s usually expressed in months or years. Longer terms lead to lower monthly payments but higher interest charges over the life of the loan. Shorter terms mean lower interest payments over time but higher monthly repayments.
  • Interest rate is the percentage of the principal that the loan provider charges as interest to the borrower. The higher the rate, the higher the cost of borrowing is.

Read more: 13 Personal Loans with Low Interest Rate in the Philippines

How Interest is Calculated on a Personal Loan

The easy and precise way to compute an interest is to use an online loan calculator. But if you’d rather do it manually, here’s a formula[1] that shows how interest is calculated on a personal loan.

Interest = (Annual interest rate ÷ Number of payments) x Loan balance

How to Compute Personal Loan Interest

  1. Divide the interest rate (expressed as a decimal) by the number of repayments you’ll make throughout the loan term. For example, if your loan term is two years and you’ll make monthly payments, divide the interest rate by 24.
  2. Multiply the result by the balance of the loan. For the first repayment, the loan balance is equal to the entire principal amount.
  3. The resulting number is the amount of interest you’ll pay for the current month.

Sample Personal Loan Interest Computation

For example, here’s how to compute personal loan interest if you’ll get a loan with the following features:

  • Loan amount: PHP 100,000
  • Loan term: 24 months
  • Interest rate: 10% per annum

Interest on a personal loan: (0.10 ÷ 24) x 100,000 = PHP 416.67

This means that for the first month of repaying your loan, PHP 416.67 is the amount of interest you’ll be paying.

See also:

What is the Monthly Payment on a Personal Loan?

The monthly payment on a loan (also called amortization or monthly installment) is a set amount that the borrower is required to pay every month until the loan is paid off. Monthly payments cover the interest on the personal loan and the principal payment.

How to Calculate Monthly Payment on a Loan?

how a personal loan is calculated - monthly payment computation

If you want to compute manually, here’s the formula[2] for loan monthly payment calculation:

Monthly payment = a ÷ {[(1 + r)^n]-1} ÷ [r(1+r)^n]

Using the same example above, here are the components of the monthly payment computation:

  • a: Loan amount (PHP 100,000)
  • r: Annual interest rate divided by 12 monthly payments per year (0.10 ÷ 12 = 0.0083)
  • n: Total number of monthly payments (24)

Monthly payment = 100,000 ÷ {[(1 + 0.0083)^24]-1} ÷ [0.0083(1+0.0083)^24]

Don’t want to bother calculating the monthly payment by hand? Computing the monthly payment on a loan is complicated for anyone who’s not a math whiz. Save time and your sanity by using a personal loan calculator.

Apply for a personal loan at Moneymax!

Using a Personal Loan Calculator in the Philippines

When you’re looking for a personal loan in the Philippines, an extremely helpful and convenient tool to use is a loan calculator. It automatically estimates the monthly payments on a loan based on the information you key in. This way, a personal loan calculator also helps you make important decisions before you apply for a loan.

How Loan Calculators Work

Loan calculators in the Philippines, which you can find on websites of loan providers, allow you to check how much you can borrow based on your monthly income or how much you’re going to pay off monthly based on your chosen loan amount and term.

Using a loan calculator is easy and quick—you just enter information such as the amount you want to borrow and your preferred repayment term, and the calculator automatically computes the amount you need to pay every month or the maximum amount you can borrow.

How to Use a Personal Loan Calculator

Want to know how to calculate a loan? Simply go to the website of your bank of choice and look for its loan calculator. Computing your monthly repayments using a personal loan calculator is a straightforward process.

  1. Enter your preferred loan amount. Be sure that it’s within the loan amount range offered by the bank.
  2. Choose a payment term (the number of months you can pay off your personal loan).
  3. Click Submit, Compute or Calculate to generate the monthly installment or amortization.

Now let’s explore the personal loan calculators that are made available online by some of the top providers in the Philippines.

How a Citi Personal Loan is Calculated

how personal loan is calculated - Citi Personal Loan calculator

Considering getting a loan from Citibank? It’s easy to know how much you’ll be paying per month on a Citi personal loan.

How to Use the Citi Personal Loan Calculator

  1. Access the Personal Loan Amortization Calculator[3] on the Citibank Philippines website.
  2. Tick “Yes” or “No” to indicate whether you have a Citi credit card or not.
  3. Select your desired loan amount from the dropdown menu.
  4. Select your preferred tenor (number of monthly payments).
  5. Your monthly payment will be automatically generated. View it on the right side of the online Citi personal loan calculator.

Related articles:

How a BPI Personal Loan is Calculated

how personal loan is calculated - BPI Personal Loan Calculator

Like Citibank, BPI makes it simple and straightforward for potential borrowers to compute how much they’ll repay monthly on a BPI personal loan.

How to Use the BPI Loan Calculator

  1. Access the BPI Loan Calculator[4] on the BPI Personal Loan website.
  2. Select or type your desired loan amount.
  3. Click the Submit button.
  4. The BPI online loan calculator will show the monthly installment amount per loan term. View the table containing the estimated monthly payments for your selected loan amount.

See also:

How a Security Bank Personal Loan is Calculated

how personal loan is calculated - Security Bank Personal Loan Calculator

Security Bank allows anyone interested in getting a personal loan to easily compute the monthly payments on a personal loan.

How to Use the Security Bank Personal Loan Calculator

  1. Go to Security Bank’s Personal Loan page[5] on its website.
  2. Scroll down to the Personal Loan Calculator.
  3. Enter the amount you want to borrow.
  4. Select your desired loan term from the dropdown menu.
  5. Enter your gross monthly income.
  6. Click the Calculate button.
  7. View the monthly installment under “Your Computed Result.”

Related article: Why and How to Get a Security Bank Personal Loan in the Philippines

Final Thoughts

As you can see, it’s easy to understand how a personal loan is calculated. The same holds true when computing the interest and monthly payment on a personal loan. You have the bank’s online loan calculator at your disposal.

However, note that results from online personal calculators should be taken as estimates only. The actual computation and final loan amount will be provided by the lender when you get approved for a personal loan.

Further reading:

Get a Personal Loan Through Moneymax Today!

Finding the right loan for any purpose can be a hassle-free experience when you use an online comparison platform like Moneymax. Shopping around for options? Check out these recommended personal loans in the Philippines.

Personal Loan ProviderFeatures
Citibank Personal Loan
Get a Citibank Personal Loan with Moneymax
  • Fast approval time in as fast as 24 hours
  • Loan amount of up to P2 million
  • Flexible payment terms of up to five (5) years
EasyRFC Multi-Purpose Loan
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  • Fast approval time in as fast as 24 hours
  • High loan amount of up to P150,000
  • Payment term of up to 12 months
SB Finance Personal Loan
Get SB Finance Personal Loan with Moneymax
  • Get approved within five banking days
  • High loan amount of up to P2 million
  • Flexible payment terms of up to 36 months
TALA Personal Loan
Get TALA Personal Loan with Moneymax


  • Fast approval time in as fast as 24 hours
  • Quick cash loan up to P15,000
  • 24/7 application using an Android phone

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