How to Calculate a Solar Loan Payment by Hand (Philippines)

Every amortizing loan payment, whether it’s Pag-IBIG, a bank home loan, or a solar-specific facility, comes from the same formula. Knowing it means you can check a lender’s quoted monthly payment yourself, instead of trusting a number you have no way to verify.

This is a formula for a diminishing-balance loan. If your loan is quoted as add-on interest instead, this formula doesn’t apply directly — see our guide to add-on vs. diminishing-balance interest for that calculation and why the two produce different totals for what looks like the same rate.

The formula

For a standard amortizing loan:

M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]

Where:

• M = your monthly payment
• P = the principal (the amount you’re borrowing)
• r = the monthly interest rate (annual rate ÷ 12, as a decimal)
• n = the number of monthly payments (the term, in months)

This is a standard formula, not something specific to solar loans or to this site — it’s the same math behind a car loan or a mortgage.

Working through an example

Take an illustrative ₱250,000 loan at a 10.5% annual rate over 36 months — matching the rate Pag-IBIG publishes for its Multi-Purpose Loan, per our Pag-IBIG solar loan guide, though the amount here is an example, not a quote.

1. Monthly rate: r = 10.5% ÷ 12 = 0.00875
2. Number of payments: n = 36
3. (1+r)ⁿ = (1.00875)³⁶ ≈ 1.3684
4. Numerator: r × (1+r)ⁿ = 0.00875 × 1.3684 ≈ 0.011974
5. Denominator: (1+r)ⁿ − 1 = 1.3684 − 1 = 0.3684
6. M = ₱250,000 × (0.011974 / 0.3684) ≈ ₱8,126 a month

Over 36 months, that’s about ₱292,520 total, of which roughly ₱42,520 is interest. This is an illustration of the formula, not a quote from Pag-IBIG or any lender — your actual approved amount, rate, and monthly payment are the lender’s to set, and Pag-IBIG’s MPL is in any case capped by your own accumulated savings rather than an amount you choose freely.

How a down payment changes the number

The formula uses P, the amount you’re actually borrowing, not the system’s full price. A down payment reduces P directly, which lowers the monthly payment more than proportionally reduces it might suggest, because you’re also cutting the interest charged on the amount you didn’t have to borrow.

Take the same 10.5%, 36-month terms, but on a ₱250,000 system with a ₱50,000 down payment, financing ₱200,000 instead:

• M = ₱200,000 × (0.011974 / 0.3684) ≈ ₱6,500 a month
• Total repaid over 36 months: ≈ ₱234,018, of which ≈ ₱34,018 is interest

Compare that to financing the full ₱250,000 at the same rate and term from the earlier example (≈ ₱8,126 a month, ≈ ₱42,520 in interest). The ₱50,000 down payment didn’t just remove ₱50,000 from what you owe — it also removed roughly ₱8,500 in interest you’d otherwise have paid on that ₱50,000 over the life of the loan.

Why early payments are mostly interest

One more thing the formula explains that a quoted monthly figure doesn’t: within a fixed monthly payment, the split between interest and principal changes every month. Early on, more of the balance is still outstanding, so more of each payment goes to interest; later, as the balance shrinks, more of each payment goes to principal. On the ₱250,000, 10.5%, 36-month loan from the example above, here’s how that split moves:

This is why paying off a diminishing-balance loan early saves real money — you’re clearing a balance that’s still charging interest — while an add-on loan doesn’t reward early payoff the same way, since its interest was already fixed for the full term at signing. See add-on vs. diminishing-balance interest for that distinction in full.

Checking a real quote against the formula

If a lender tells you the monthly payment for a specific principal, rate, and term, you can run the same three inputs through this formula and compare. A close match confirms the payment is a plain amortization. A meaningful gap can mean one of a few things:

• The quoted rate is add-on, not diminishing balance, which this formula doesn’t model — see the interest rates guide.
• Fees (processing, documentary stamp tax, insurance) are baked into the quoted monthly figure rather than charged separately.
• The term you were told doesn’t match the term used to calculate the payment.

Any of these is worth asking the lender to clarify directly, in writing, before signing.

Skipping the arithmetic

Doing this by hand once is worth it so you understand what actually drives the number — principal, rate, and term, in that order of impact. After that, the site’s own solar financing calculator runs this arithmetic for you, lets you compare terms and rates side by side, and pairs with the cost calculator if you haven’t sized your system yet. Once you have a monthly figure you trust, the real question is whether it makes sense against your own bill savings — covered in is a solar loan worth it and buy vs. finance solar.