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Thread: Equal Principal Payment Method?

  1. #1
    New Member
    Join Date
    Mar 2007
    Location
    Nebraska
    Posts
    23

    Equal Principal Payment Method?

    Ok i found an example online and the principal through out the term never changed is this right? This is my problem ( all these where blank on a table and i had to fill them in.) I dont know how to do the 6th period because your going over the amount of the begninng balance?

    Assume you take out a simple interest on the unpaid balance loan to buy some new equipment. The loan amount is $15,000 for three-years, 10% interest loan with semi-annual payments made.

    Period BeginningBalance Principal Interest TotalPayment EndingBalance
    1 15,000.00 $2,500 1,500.00 4,000 11,000.00
    2 11,000.00 2,500 1,100.00 3,600 7,400.00
    3 7,400.00 2,500 740.00 3240 4,160.00
    4 4,160.00 2,500 416.00 2,916.00 3,332.00
    5 3,332.00 2,500 333.20 2833.20 498.80
    6 498.80 2,500

  2. #2
    Elite Member
    Join Date
    Feb 2004
    Location
    Ottawa, Ontario
    Posts
    11,759
    "Equal principal" payments mean the same amount is applied to principal
    at each payment; AND the payment reduces gradually, as the interest does:

    Code:
       opening princ.payt ending int.payt total payt
    1: 15000     -2500     12500    750      3250
    2: 12500     -2500     10000    625      3125
    and so on...
    All that's needed for calculation of the equal principal portion of payment
    is amount divided by number of payments, hence: 15000 / 6 = 2500.

    You need to use 5% to calculate the interest amount: SEMI-ANNUAL;
    the 10% is an annual rate.

    Let us know if not clear...
    I'm just an imagination of your figment !

  3. #3
    New Member
    Join Date
    Mar 2007
    Location
    Nebraska
    Posts
    23
    Denis,
    Your such a great help
    I didn't realize that i cut the % in half since it was semi-annual makes sense now
    Thanks Again
    Nikki

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