Loan Interest Calculation

I

ILovePizza

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Jan 19, 2009
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I’m having trouble doing some interest rate calculations, and was hoping someone could provide some guidance (smile),

Amt of loan (Principal): $26731.73
Interest Rate: 1.9% (0.190)
Calculated : Monthly
Length of Loan: 3-years
Fact: Payments are: $764.50 Monthly
Number of Payments: 36

This is what my math book shows as an example. I thought if I could calculate the above example out correctly, then I could move onto the questions, but this is where I’m having difficulties.

My Formula: 26731.73 x (1+ 0.190 ÷ 12) ^ (36/12) = 28021.6977706274

How do I figure out the interest to be paid, as shown in the chart example below?

Pay #-----Pay Amt ($)-----Interest ($)-----Principal ($)-----Balance ($)
--------------------------------------------------------------------26731.73
1----------764.50------------42.33-----------722.17-----------26009.56
2----------764.50------------41.18 ----------723.32 ----------25286.24
3----------764.50------------40.04 ----------724.46 ----------24561.78

Thanks in advance!
 
I appreciate your quick response, and I’ve applied the correct:

26731.73 (1+0.019/12)^36/12 = 28298.425637526

I’m still confused on how to get the initial interest amount to be paid, i.e. 42.23, or in that fact, how do they get the monthly principal to be paid…722.17?
 
ILovePizza said:
I’m having trouble doing some interest rate calculations, and was hoping someone could provide some guidance (smile),

Amt of loan (Principal): $26731.73
Interest Rate: 1.9% (0.190)
Calculated : Monthly
Length of Loan: 3-years
Fact: Payments are: $764.50 Monthly
Number of Payments: 36

This is what my math book shows as an example. I thought if I could calculate the above example out correctly, then I could move onto the questions, but this is where I’m having difficulties.

My Formula: 26731.73 x (1+ 0.190 ÷ 12) ^ (36/12) = 28021.6977706274

How do I figure out the interest to be paid, as shown in the chart example below?

Pay #-----Pay Amt ($)-----Interest ($)-----Principal ($)-----Balance ($)
--------------------------------------------------------------------26731.73
1----------764.50------------42.33-----------722.17-----------26009.56 (26731.73*0.019/12 = 42.33)
2----------764.50------------41.18 ----------723.32 ----------25286.24(26009.56 *0.019/12 = 41.18)
3----------764.50------------40.04 ----------724.46 ----------24561.78

Thanks in advance!
Click to expand...
 
Now your method seems much easier than what I’ve been doing (smile).

(26731.73*0.019/12 = 42.33)

Can I use this rather then what I have been using, or in combination with?
 
Hang-on; I’ll still have to know how to break in down by months, over the number of years for the term of the loan.
So I still need the original method, which I’m still not sure about.

Which brings me back to: 26731.73 (1+0.019/12)^36/12 = 28298.425637526

So how do I get what I need from the above?

If I perform the new method on my answer I get: 28298.43*0.019/12 = 44.8058475

But this doesn’t seem right.
 
I’m sorry, but I have been called away, but will check back in about 2-hours to see any replies. Thank you!
 
Your table is called an Amortization Schedule.

Your formula is not appropriate for creating this schedule. Subhotosh's information is appropriate.

There is a formula for calculating the Payment Amount. (Let me know if you need this formula.)

Once you know the Payment Amount, it is straightforward to create an Amortization Schedule.

The Interest portion of the Payment Amount is calculated as the periodic interest rate (0.019/12) times the previous balance, and is usually rounded to the nearest cent.

The Principal portion of the Payment Amount is calculated as Payment Amount minus Interest.

The new Balance is calculated by subtracting the Principal from the previous balance.

(The last payment amount may need to be adjusted to account for the rounding.)

If you think there is a single formula that will generate the entire Amortization Schedule, then you are thinking wrongly.

The table is generated step-by-step. If there are 36 payments, then you need to go through the above steps 36 times.

Do it by hand, use a spreadsheet program, write your own program, use an amorization calculator, or request the schedule from your banker.
 
ILovePizza said:
Which brings me back to: 26731.73 (1+0.019/12)^36/12 = 28298.425637526
Click to expand...
WHAT is that? What are you trying to do? Why are you showing 36/12?
All you're doing here is calculating the loan amount's value 3 years later, with no payments applied; WHY?

You have the payment amount (764.50) and the loan amount (26731.73) and the monthly rate (.019/12);
that's all you need.

Here's a short example; 400 borrowed @ 12% (.01 per month) for 4 months; payment = 102.51 :
Code: 
0                                   400.00
1  -102.51      +4.00               301.49
2  -102.51      +3.01               201.99
3  -102.51      +2.02               101.50
4  -102.51      +1.01                  .00
 
I’m sorry for any confusion but my math book provides an example prior to the questions, and I’m simply trying to use the formula in the example.
So using the formula provided in my math book for the amounts Denis provides, it would look like this:

Principal = 400.00
Interest = 12% (0.12)
Paid each month = 12 (?)
For a period of 4 months (4 months out of 12) (?)

400 (1+0.12/12)^(4/12)= 401.3289134

So this is the point that I’m confused at.

Where or how do you get $102.51

Does this make sense?

Same with my original example in my math book:

26731.73 x (1+ 0.190 ÷ 12) ^ (36/12) = 28021.6977706274

Where or how did they get $ 722.17

Can I get a step by step…I’m a visual learner
 
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