The Loan Repayment Calculator
This calculator is used to deal with those cases where a sum of money is borrowed for a certain amount of time, and is repaid at periodic intervals with a percentage being added on at the end of each interval, based on what is still owed at that time.
It is customary to work out the repayments (or instalments) so that the payment at the end of the LAST period exactly matches the amount owing at that time. And that is what this calculator does.
A simple example would be when 1000 pounds (or any other currency) was borrowed for 12 months, with interest being charged at 2.15% per month, and the loan was repaid at monthly intervals.
The figures 1000, 2.15 and 12 entered in that order in the top three boxes will give the answer 95.43 as the amount that has to be repaid each period (= month, in this case).
It can also be seen that in total 1145.19 will have been repaid which means a percentage over the total time of the loan (1 year in this case) equal to 14.52
Note that rounding is done to present the final figures (as currency) to 2 decimal places, but the background working is done with much greater accuracy than that.
Remember that the percentage MUST be for the period concerned
For instance, consider mortgage repayments.
The percentage is usually given as an ANNUAL rate, but the repayment instalments are usually paid MONTHLY.
As an example, suppose a mortgage of 100,000 is taken out, and is to be repaid over 25 years at an annual rate of 8.5%.Putting those values in will show that the instalments needed are 9771.17 but those are the ANNUAL instalments. Most probably they are going to be paid monthly. So, dividing that by 12 gives monthly instalments of 814.26
Quarterly payments would be 2442.79
The values given above are derived from a formula working on the three input numbers. That is purely arithmetical. In real life situations there may well be additional charges added in at some stage or other which cannot be entered, or taken into account, here. A cynic might say that you will almost certainly finish up paying more than the figure given above!
|A P RThis stands for the Annualised Percentage Rate which is also known as the Annual Equivalent Rate or A E R. It is the figure which all those involved in lending money (mortgages, loans, credit, deferred payments etc.) have to display in their advertising. Its purpose is to allow a comparison to be made between different offers.|
A simple APR can be obtained from this calculator. Just put 1 in the first box, the monthly percentage rate in the second box, and 12 in the third box. The value in the last box will be the APR.
Example. A monthly rate of 1.85% will show an APR of 12.43 %
Put another way, paying the monthly instalments as shown resulted in exactly the same amount being paid as if nothing had been paid during the year, but the whole lot was paid off at 12.43 % at the end of the year.
It must stressed that this a simple value. This follows from the Warning given above. When a commercial organisation calculates its stated APR, it must (by law) include all the other charges which determine the total to be repaid by the borrower. In fact the rules governing exactly how it all has to be done are very complex.In short, this calculator can serve as no more than a guide!
Go to Cleave Books main Index