Installment Loan Calculator

You might not be the most adept at mathematics but who needs to when calculators are here to stay! This handy tool is useful in every area of life where you need to do a calculation or two.

 

The installment loan calculator helps you to ascertain the required payment due at a particular time towards settling a cash help. These periods could range from daily to monthly, depending on the initial conditions of the loan. For instance, your personal bills and your mortgage could be paid off in easy installments monthly without you having to ponder on how to get back the whole sum borrowed when it’s time to pay back. But, these installments need to be determined correctly via the aid of loan payment formula whilst using a guide that helps you to understand just how the system of payment works.

How do I use a loan payment Calculator?

You see an item on the market you desire to possess but on a second glance through your savings and income accounts, you realize that you can’t afford it. Now you are left with one choice- to turn to the bank for a financial assistance. Going with this choice should mean only one thing – that you believe you would be able to make the required payments from what you earn. But, still you might ask, how will the loan repayment be? That’s where this formula comes in.

So, what is the pay back installment loan calculator,
installment loan payment calculator,
loan installment calculator,
home loan installment calculator,
installment calculator for car loan all about?

With every formula comes a wide range of parameters in it but the loan formula is not any different. Getting familiar with the parameters and phrases below will be vital in fully understanding the concept of the loan

 

  • Principle

This is the same as the amount of money that a financial institution, which could either be a bank or a private lender, lends out to you. This is the money you have to repay to the lending firm on the agreed terms. Kindly note, this amount does not include interest.

  • Yearly rate 

It is also referred to as the nominal rate in some parts. It is the interest rate placed by a financial institution. Certain factors, chiefly among them being inflation rate directly affects this as the lower the yearly rate, the higher the inflation rate. This is key to ensuring that the real burden generated by the interest rate lessens. 

  • Payment term 

In clear terms, this refers to the time frame the loan will last if the installment payments are made as at when due, that is, monthly. Loans very in terms of duration. Whilst a 12-year fixed rate mortgage might have a 12-year term, some auto loans are paid back fully in under a decade.

  • Payment Period: 

This is the specific period obligated by the lender to the borrower over which the cash assistance has to be paid back.

  • Periodic rate 

This signifies the interest rate that the financial institution lending out the money has chosen to place on the cash help. It could vary from being a yearly rate to one charged on a daily basis. For instance, a bank could decide to charge 4% per month on every of its credit card loans or charge 1% quarterly on loan. To get the timely rate in this case, you will be required to divide the yearly rate by the relayed number of payments within one year. In the event of monthly payments with a 4% annual rate, the timely interest rate would be 4%/12 which equates to 0.333% 

  • Loan payment 

The sum of money that needs to be repaid by the borrower for every payment period.

  • Loan payment schedule 

This consists partly of the interest and the repayment of the money originally borrowed. This balance between the two ensures that as the loan gets paid back, the share of the principal in the installment increases.

Considering all these factors, here is the formula;

Periodic loan payment = Loan amount / (((1 + Periodic rate) ^ Number of payments) – 1) / (Periodic rate * ((1 + Periodic rate) ^ Number of payments))

 

Payment scheduling is vital for both the lender and the borrower to keep tabs on the state of the loans at every point in time. Whilst some have come up with different ways to go about it, organizing the scheduling in tables and charts have proven to be an effective strategy over time to make sure that each tiemly payment is accounted for and duly calculated. Every one of these payments is made up of the interest and the principal as they both are connected in an ever-changing ratio. 

A practical example of a standard amortization schedule will do justice to the afore mentioned points. Now, let us consider a loan payment schedule of a $1,000 for a 1-year mortgage loan that needs to be repaid monthly with a rate of 15 per cent per month. 

 

Payment Month Total Monthly Payment Principal Payment Interest Payment Total Interest Remaining Balance
1 $90.26 $77.76 $12.50 $12.50 $922.24
2 $90.26 $78.73 $11.53 $24.03 $843.51
3 $90.26 $79.71 $10.54 $34.57 $763.80
4 $90.26 $80.71 $9.55 $44.12 $683.09
5 $90.26 $81.72 $8.54 $52.66 $601.37
6 $90.26 $82.74 $7.52 $60.18 $518.63
7 $90.26 $83.78 $6.48 $66.66 $434.85
8 $90.26 $84.82 $5.44 $72.09 $350.03
9 $90.26 $85.88 $4.38 $76.47 $264.14
10 $90.26 $86.96 $3.30 $79.77 $177.19
11 $90.26 $88.04 $2.21 $81.99 $89.14
12 $90.26 $89.14 $1.11 $83.10 $0.00

 

Are there other fees for me to look out for in the process of me getting my loan approved?

This question hinges largely on whether your lender wanting to charge personal loan fees or not. In the event that he chooses to, here are a few fees to keep your eyes on:

 

  • Prepayment Penalty

If you choose to cut the line and pay on time, the financial institution might charge a certain fee to replace lost interest. Financial experts advise that you ensure that prepayment fees are clearly stated on your loan agreement, especially if you are the kind to offset your loans early.

  • Late Fee

You incur this if you don’t make your repayments on time.

  • Origination fee

 This is paid only once to cover the costs of the whole loan- approval process.

 

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