Before applying to the bank for a loan, it makes sense to pre-calculate the monthly loan payment. Thus, you will be able to estimate and plan your future financial flows. Or maybe, on the contrary, decide to lower the loan amount so that the monthly payment is not a serious burden on your personal budget.
Instructions
Step 1
In retail lending, as well as in lending to small and medium-sized businesses, an annuity payment scheme is used. If you have decided on the term and amount of the loan, ask the bank for the appropriate interest rate. To calculate your monthly loan payment, search the Internet for a loan calculator. This is a simple program that calculates loan payments depending on the entered loan parameters.
Step 2
If you want to understand how the payment is formed, as well as calculate the monthly loan payment yourself, then, first of all, familiarize yourself with the mathematical formula - the annuity payment formula. P = C? (i? (1 + i) ^ n) / ((1 + i) ^ n - 1), where P is the amount of payment
С - loan amount
i is the bank interest rate
n - the number of periods of interest accrual
Step 3
In order to calculate the monthly loan payment, substitute the values of the variables in the formula. However, pay attention to the following dependency. Convert the bank's annual interest rate into monthly or daily, dividing, respectively, by 12 or 365 (366) days. Depending on this, the value of n, which is the number of interest calculation periods, will also change. If you are calculating based on a monthly rate, then n will be equal to the number of months in the loan term. If from a day, then n will be equal to the number of days in the crediting period. In this case, the interest rate itself, regardless of its value, before substitution in the formula, convert it to decimal fractions.
