# Calculating Your $10,000 Loan Payment • MHB • Wilmer In summary, a person borrows$10,000 over three years, with payments of the same amount each month, and receives an interest rate of 12% APR compounded monthly.
Wilmer
Methinks ya'll will have fun with this one!

A loan of $10,000 is set up this way: 3 years: 36 monthly payments of SAME amount year#1 rate: 12% APR compounded monthly year#2 rate: 10% APR compounded monthly year#3 rate: 8% APR compounded monthly What's the monthly payment? Wilmer said: Methinks ya'll will have fun with this one! A loan of$10,000 is set up this way:
3 years: 36 monthly payments of SAME amount
year#1 rate: 12% APR compounded monthly
year#2 rate: 10% APR compounded monthly
year#3 rate: 8% APR compounded monthly

What's the monthly payment?

Just to clarify, does '12% APR compounded monthly' mean that we pay a monthly interest on the remaining loan of 12% / 12?
And is the remaining part of the fixed monthly payment the reduction of the loan?

If so, then this looks like an Excel excercise, for which I get that the monthly payment is \$326,97. That means that in total we pay \$32,697 instead of \$10,000, which suggests we're talking to a loan shark. I like Serena said: Just to clarify, does '12% APR compounded monthly' mean that we pay a monthly interest on the remaining loan of 12% / 12? And is the remaining part of a the fixed monthly payment the reduction of the loan? If so, then this looks like an Excel excercise, for which I get that the monthly payment is \$326,97.
That means that in total we pay \$32,697 instead of \$10,000, which suggests we're talking to a loan shark.
Huh? 326.97 * 36 = 11770.92 : so total interest of 11770.92 - 10000.00 = 1770.92

326.97 is correct as monthly payment.
What do you mean with "Excel exercise"? Guess and check?

The payment can be precisely calculated. No Excel required :)

.12 / 12 = .01 would be monthly rate during 1st year.
Owing after 1st payment: 10000.00 + 100.00 - 326.97 = 9773.03

Similarly .10/12 during year2 and .08/12 during year3

I find this problem interesting.

You can clearly solve for the IPMT and PPMT components each month using Excel for all 36 months then solve for the total interest owed and get a payment, but I don't think that's a very elegant solution. Do you have another way to solve for this without doing this recursion?

Also this sounds like a challenge problem rather than you asking for help, right?

Jameson said:
Do you have another way to solve for this without doing this recursion?

Also this sounds like a challenge problem rather than you asking for help, right?
Yes to both questions :)

Wilmer said:
Methinks ya'll will have fun with this one!

## 2. What is the difference between a fixed and variable interest rate for a $10,000 loan? A fixed interest rate will remain the same throughout the life of the loan, while a variable interest rate may fluctuate based on market conditions. This means that your monthly loan payment may also change with a variable interest rate, whereas it will stay consistent with a fixed rate. ## 3. How does the loan term affect my monthly payment for a$10,000 loan?

The loan term refers to the length of time you have to repay the loan. Generally, a longer loan term will result in a lower monthly payment, but you will end up paying more in interest over the life of the loan. A shorter loan term will result in a higher monthly payment, but you will pay less in interest overall.

## 4. Is there any way to lower my monthly payment for a $10,000 loan? You may be able to lower your monthly payment by negotiating a lower interest rate, extending the loan term, or choosing a different type of loan. However, keep in mind that these options may result in paying more in interest over time. ## 5. How can I use the loan payment calculation to determine if I can afford a$10,000 loan?

To determine if you can afford a \$10,000 loan, you should compare the monthly payment to your current income and expenses. You should also consider any potential changes to your financial situation in the future. It is important to only take on a loan that you can comfortably afford to repay.

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