A rare person cannot take out a loan today. But for some, this is the only way to accommodate themselves and their families, and for others, it is a way to not deny themselves all kinds of delights, including a new car, chic shoes, or a trip while traveling.
In any case, a loan is part of our lives and it would be nice to understand how to calculate loan payments. Is it possible to do it yourself at home? Or do you have to be a specialist?
There has been rapid growth in the past ten years, the credit market and loans to private individuals have become particularly popular. It is logical that people’s financial literacy has increased slightly. Indeed, it is true that people started saving their money and thinking about where to spend it.
I had to plan the cash flows and imagine the means from which the loans would be paid out. The secret is that the availability of credit makes you forget the sense of reality.
This means that a person always has a certain balance in stock, be it a credit card or a quick loan. In addition, the advertising promises that there is always money in your wallet for a new dress or covers for a car. The pink veil will wear off later when it’s time to settle.
Before you decide
Yes, you have to choose a loan! Can you find the money for a monthly payment? And do you really need the thing you want to take money for? You need to consult with family members and of course, don’t take out the first loan you see. The offers vary in different banks and sometimes they can be beneficial for your category. For example, an acceptable percentage can be offered to retirees, students, or young families.
It is worth considering the force majeure option when there is simply no money available for a loan. A number of banks meet customers and offer debt rescheduling. Agree, trust is added when escape routes are considered.
Of course, you can calculate the loan payment in advance. Sberbank offers such an option online, for example. There is a calculator on the official website where you can register the required amount and preferred loan term.
So how do you calculate loan payments? And why is this necessary when the bank can do everything independently? For full trust in the transparency of the services, the payment structure and the absence of hidden fees. You can do preliminary calculations at home by having a calculator, pencil, and a sheet of paper on hand.
Most popular in credit practice are annuity payments. Your amount is the same for the entire term of the loan contract. Such a payment consists of two parts: funds that are used directly to pay off the loan and interest that has accrued on the amount of the debt. The amount remains unchanged until the end of the payments, but initially, the interest prevailed and in the end – the main debt. And how do you calculate loan payments of this type? There is a special formula: P = C * (% * (1 +%) x n ) / ((1 +%) x ( n -1).
In this formula, P is the payment amount, C is the loan amount. Accordingly,% – reflects the interest rate, and n – This is the accrual period in months. To correctly calculate the loan payment schedule, the annual rate can be converted into a monthly rate and then expressed in decimal numbers. There is a monthly payment.
Up to a day
However, when creating a loan contract, the schedule is created for specific days and therefore the annual rate is converted to the daily rate, which is divided by the number of days per year. In this case, the value n increases. When calculating monthly and daily rates, the difference is small, just a few dozen dollars, but it can also carry weight. If you have the construction of tables, you can make an analogy of a bank payment up to a day.
So we can bring another concept into the conversation “Differentiated Payment”. What is it and how are loan payments of this type calculated? Therefore, a differentiated payment differs in that it decreases at the end of the loan term, with the main part being the loan debt and the remaining part being the percentage of the outstanding balance.
Back to the question of how the amount is calculated The total amount of debt should be divided by the number of credit months planned. The number received is the main payment. The calculation formula is simple – In the = S: N, where In the – is the main payment, S – the amount of the loan and N – the number of months.
However, this is not all, as you also need to learn how to calculate the monthly loan payment taking interest into account. Another value is required here – p – annual interest rate. For the final calculation, you need to multiply the loan amount by the annual installment and divide the result by 12 months.