Consumer loan help!

paradox6996

New member
Joined
Jul 29, 2007
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1
Ok I've tried to google this but no luck their. I'm writing a program that calculates someones consumer loan. If we use $1000 as principle, and 15%(.15) as the rate and the duration of the loan is 18 months, you would in the end only get $775 because the the interest is deducted from the principle leaving you with 775$ from $1000. The user enters their own principle, rate, and time, and the program is suppose to calculate how much to request by adding an extra to the principle. For example: If I want a $1000 loan(15%int. 18 months duration) and the interest is taken out at the time of the loan I would only get $775. I need to come up with a number for them to request to get the $1000 loan they need. So does anyone know of an equation that I could use to calculate any principle, rate, time to come up with the requested loan amount they need to ask for. Thank You!
 

TchrWill

Full Member
Joined
Jul 7, 2005
Messages
856
I'm writing a program that calculates someones consumer loan. If we use $1000 as principle, and 15%(.15) as the rate and the duration of the loan is 18 months, you would in the end only get $775 because the the interest is deducted from the principle leaving you with 775$ from $1000. The user enters their own principle, rate, and time, and the program is suppose to calculate how much to request by adding an extra to the principle. For example: If I want a $1000 loan(15%int. 18 months duration) and the interest is taken out at the time of the loan I would only get $775. I need to come up with a number for them to request to get the $1000 loan they need. So does anyone know of an equation that I could use to calculate any principle, rate, time to come up with the requested loan amount they need to ask for.

The formula for calculating a monthly loan payment is R = Pi/[1 - 1/(1+i)^n] where R = the periodic payment, P = the principal, or debt to be paid off, n = the number of payment periods over which the payments will take place, and i = the periodic interest rate in decimal form. The interest rate for a loan is usually quoted as an annual rate such as 8%. In the formula the first thing we do is convert this to i = .08 when considering annual payments.
If payments are to be made monthly, i = .08/12 = .006666 as the monthly interest rate. An example will illustrate the use of the formula.
Lets say you want to borrow $10,000 for a home improvement, to be paid off monthly over a period of 5 years, with an annual interest rate of 8%. So P = 10,000, n = 5 x 12 = 60, i = .08/12 = .006666. Then we have R = 10000(.006666)/[1 - 1/(1+.006666)^60] = 66.66/[1 - 1/(1.489790] = 66.66/.328764 = $202.76 per month. As simple as that. Over the life of the loan you will pay $12,165.49 back to the bank thereby incurring the cost of $2,165.49 for the priviledge of borrowing the money.
 

Denis

Senior Member
Joined
Feb 17, 2004
Messages
1,495
paradox6996 said:
I'm writing a program that calculates someones consumer loan. If we use $1000 as principle, and 15%(.15) as the rate and the duration of the loan is 18 months, you would in the end only get $775 because the the interest is deducted from the principle leaving you with 775$ from $1000.
Are you sure there are such loans? They are evidently "single payment loans".
Seems illegal: you're charged interest on 1000, but get only 775.
I presume 15% is used for calculation purposes, and is not the interest rate
declared on the contract; borrowing 775 and paying back 1000 18 months later
calls for a rate of ~17.11 % cpd. monthly.

Anyway, if you simply need the mechanics:
t = total loan (1000)
c = cash proceeds (775)
r = rate (.15)
n = number of months (18)

Formula: t = 12c / (12 - rn)

If the borrower wishes to obtain $775 (your example):
t = 12(775) / (12 - .15(18)) = 1000 = amount of loan to request

Another example:
you wish to get $1200, rate is 9%, time is 27 months:
t = 12(1200) / (12 - .09(27)) = ~1504.70 = amount to request
 
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