Thread: [HELP] Loan Calculation: borrow $1000 for 1 yr @ 8% (if repaid in 1 yr) 1. [HELP] Loan Calculation: borrow$1000 for 1 yr @ 8% (if repaid in 1 yr)

Hi, first of all sorry for my bad English.

I really need this Loan Calculation formula, because Im being doing this all day long.,
Really appreciate those who master on Loan, accounting or Math can solve my problem.

I attached the result of Loan Calculation .
How this result works is, you borrow $1000 for 1 year and the Interest is 8%, this is for 1 year term repayment. But if you borrow$1000 for 2 year term the interest will be double = 16%.
So if you have 3 year term then the interest will be triple.

How am I going to get this type of result by with formula.?
Thank you for you help.

1.JPG

2. No interim payments, just the one at the end?

3. Originally Posted by tkhunny
No interim payments, just the one at the end?

From what i know interim payments is a total of paid of. From the first situation is
total loan + interest = 1080. Principle = 1000, interest = 80.
How exactly this calculation works? Because if you see betwee 12 & 24 month
the interest is 8% but for 24month interest double..

4. Originally Posted by Denis
Can't "get/see" your picture;
anybody knows how to "see" it? I get a "blank"...
The image appears for me; clicking the thumbnail opens an enlarged version, and clicking that pop-up enlarges it more. (The image shows two spreadsheet outputs.)

5. Originally Posted by billclory
Hi, first of all sorry for my bad English.

I really need this Loan Calculation formula, because Im being doing this all day long.,
Really appreciate those who master on Loan, accounting or Math can solve my problem.

I attached the result of Loan Calculation .
How this result works is, you borrow $1000 for 1 year and the Interest is 8%, this is for 1 year term repayment. But if you borrow$1000 for 2 year term the interest will be double = 16%.
So if you have 3 year term then the interest will be triple.

How am I going to get this type of result by with formula.?
Thank you for you help.

1.JPG
What are you talking about that the interest rate doubles, triples, etc. Interest rates are quoted in terms of standard periods, usually years. There is no rule that says rates must be proportional to terms. If this is a class room problem, please give us the exact and complete statement of the problem. If you are trying to compare proposed loan contracts in the US, please give us the interest in the "Schumer box" for both proposed loan.

6. Originally Posted by billclory
How this result works is, you borrow $1000 for 1 year and the Interest is 8%, this is for 1 year term repayment. But if you borrow$1000 for 2 year term the interest will be double = 16%.
So if you have 3 year term then the interest will be triple.
Originally Posted by billclory
From what i know interim payments is a total of paid of. From the first situation is
total loan + interest = 1080. Principle = 1000, interest = 80.
How exactly this calculation works? Because if you see betwee 12 & 24 month
the interest is 8% but for 24month interest double..
What I see in the tables is a monthly repayment of a loan. The monthly payments have been calculated according to some formula, but not one that I am familiar with. I am not sure of the meaning of all the terms used, particularly "cost" and "profit". But it appears that they are starting off by adding a total amount of interest to the balance, so that in the one-year case the balance starts at $1080, and in the two-year case$1160. This is evidently what you are asking about: this initial interest is $80 for one year and$160 for two years.

When you say the interest doubles, you are not saying that the interest RATE doubles; it is clearly stated as 8% in both tables. You are saying that the interest AMOUNT that they add to the balance is 8% of the principal and 16% of the principal, respectively. That is, it is the SIMPLE interest amount that would be charged if the loan were repaid all at once (i = prt). Then they seem to be just dividing this balance plus interest by the number of payments, to get the amount of each payment. This tells me that these loans are NOT being handled in the way I am familiar with; interest is not being charged based on the remaining balance each month, but as if the entire loan were left unpaid for the entire term. (I would call that unfair, unless it is just standard practice where you are.)

Can you tell us more about the tables? Clearly you did not make them; where did they come from, and what information do you have about them? Do you have access to the spreadsheets themselves so that you could look at the formulas being used, or just the pictures? If the tables are from a book, what does it say about the loan? If they are for an actual loan you have taken, what information were you given about the rules of the loan?

I can do a little searching (and experimentation with a spreadsheet of my own) to try to understand what everything means, but it will help a lot if you tell us what kind of loan it is called, so I don't have to discover it on my own. If your information is not in English, give us the original so we can pursue it; and if you are in some particular country, let us know so we might be able to find out the rules for loans there.

7. Dr. Peterson

In the US, some types of loans do involve stipulating a single payment at maturity due at maturity without any payment of periodic interest or even any explicit mention of an interest rate. They are usually for relatively short terms and very seldom involve loans to individuals. Again in the US, the overwhelming majority of loans, particularly to individuals, require periodic payment of interest on the amount of principal still unpaid. Finally, there are both federal and state laws that limit the ways that interest may be disclosed and calculated. Perhaps the most common type of loan to individuals in the US is the so-called self-amortizing loan, which involves a fixed interest rate and a periodic payment constant in amount but with a constantly declining proportion of that payment being interest.

8. Originally Posted by JeffM
Dr. Peterson

In the US, some types of loans do involve stipulating a single payment at maturity due at maturity without any payment of periodic interest or even any explicit mention of an interest rate. They are usually for relatively short terms and very seldom involve loans to individuals. Again in the US, the overwhelming majority of loans, particularly to individuals, require periodic payment of interest on the amount of principal still unpaid. Finally, there are both federal and state laws that limit the ways that interest may be disclosed and calculated. Perhaps the most common type of loan to individuals in the US is the so-called self-amortizing loan, which involves a fixed interest rate and a periodic payment constant in amount but with a constantly declining proportion of that payment being interest.
But the tables clearly show a monthly payment ($90 for the one year loan), which is (1000 + 80)/12. What I described seems to be what they are doing, though I'm still trying to figure what the "cost paid" column represents; I thought it might be the amount of the payment that is current interest, but that is not true. And I think I have heard of this kind of loan somewhere. 9. Originally Posted by Denis Well, if it's a constant monthly payment loan, then the payment is 333.30; statement format: Code:  # PAY'T INTEREST BALANCE 00 10000.00 01 -333.30 66.67 9733.36 ... 12 -333.30 46.45 6680.38 13 -333.30 89.07 6436.15 ... 24 -333.30 50.76 3524.81 25 -333.30 70.50 3262.01 ... 35 -333.30 12.94 326.77 36 -333.30 6.53 .00 EDIT: whoops, used 10,000 instead of 1,000; just divide everything by 10: like pay't = 33.33 Sorry 'bout that!! If this were a standard installment loan, the monthly payment (according to Excel's PMT function) would be$86.99 for our 8% one-year loan. My sense is that what is being done is a simplistic approximation of an installment loan, which is easier to calculate and to understand, and requires just a bit higher payment for short loans because it doesn't take the declining balance into account. I would not be surprised if it were common (somewhere?) for such short-term loans. I haven't yet taken time to research it.

10. I found that the term for this kind of loan is "precomputed loan": the interest is computed for the whole loan as if it were not paid in installments, and this is added to the balance at the start.

This should answer the OP's question; as I previously said, the formula is the simple interest formula, i = prt, where t is the total time for the loan; the payment is (p + i)/(12t), dividing the balance by the number of payments.

I'm still playing with the other columns in the table, to figure out whether they are using the "rule of 78" or some other method to determine how much interest is owed at any time. But that is not necessary for the original question.

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