Calculating Loan Payments: A Simple Formula

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  • Thread starter Wilmer
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In summary, to calculate your loan payments, you can use a simple formula or consult with a financial advisor. The interest rate is the percentage of the loan amount that you will be charged, and a higher interest rate means higher payments. The loan term also impacts payments, with longer terms resulting in lower monthly payments but higher total interest. In most cases, you can change your loan payments through refinancing or restructuring. Additional fees or charges may also apply, so it is important to carefully review your loan agreement.
  • #1
Wilmer
307
0
I thought this was "INTERESTing".
You want to borrow a dollars, with monthly payment of p dollars, such
that you'll owe f dollars after making n payments, at monthly rate r%.
Example:
Code:
   MONTH    PAYMENT        INTEREST   BALANCE
     0                                3000.00
     1      -522.56         30.00     2507.44
     2      -522.56         25.07     2009.95
     3      -522.56         20.10     1507.49
     4      -522.56         15.07     1000.00
So, in example: a=3000, f=1000, p=522.56, n=4, r=.01

Devise a formula calculating p in terms of a, f, n, r
 
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  • #2
No takers?

My formula (in case I lose it!)
a = amount of loan
f = future amount of loan
n = number of monthly payments
r = monthly rate
p = payment amount

p = r[a * (1 + r)^n - f] / [(1 + r)^n - 1]

...anutter useless formula!
 

Related to Calculating Loan Payments: A Simple Formula

1. What is the formula for calculating loan payments?

The formula for calculating loan payments is:
P = (Pv * r) / (1 - (1 + r)^-n)
Where P is the loan payment, Pv is the present value of the loan, r is the interest rate, and n is the number of payments.

2. How do I calculate the present value of a loan?

The present value of a loan can be calculated by adding up all the future payments and discounting them back to their present value using the interest rate. This can be done manually or by using a financial calculator or spreadsheet software.

3. What is the difference between interest rate and annual percentage rate (APR)?

The interest rate is the percentage of the loan amount that is charged as interest. APR, on the other hand, includes not only the interest rate but also any additional fees or charges associated with the loan. Therefore, APR gives a more accurate picture of the total cost of the loan.

4. Can I use the loan payment formula for any type of loan?

Yes, the loan payment formula can be used for any type of loan, including mortgages, car loans, and personal loans. However, the specific values for Pv, r, and n may vary depending on the type of loan and the terms of the loan agreement.

5. How can I lower my loan payments?

There are a few ways to lower your loan payments. One option is to negotiate a lower interest rate with the lender. Another option is to refinance the loan with a lower interest rate or a longer repayment period. You can also make extra payments towards the principal amount to reduce the total amount of interest paid over time.

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