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Loan amount calculation12/15/2023 ![]() Periodic loan payment = Loan amount / (((1 + Periodic rate) ^ Number of payments) - 1) / (Periodic rate × ((1 + Periodic rate) ^ Number of payments)) = 10,000 / (((1 + 0.005) ^ 60) - 1) / (0.005 × ((1 + 0.005) ^ 60)) = $193.33Īfter computing the periodic loan payment, you can have a much better view of your future obligations that help you to decide whether you can handle the repayment of the loan.Īs we discussed, most loans are repaid in equal payments (installments) over a specific time: loans constructed like this are called amortized loans. We can employ the previously stated loan payment formula using the above values. Number of payments = Number of years × Number of payments in a year = 5 × 12 = 60. Periodic rate = Annual rate / Number of payments in a year = 0.06 / 12 = 0.005 = 0.5%.
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