Formula to calculate Equal Monthly Payments
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Vtoria wrote:
HELP!?!?!?!?!
NO KIDDING! Who in the world is charging 240 APR interest??? :mad: BTW, at 240 APR, $252 won't even make the interest payment, let alone pay it off in a year! :omg: David
Hi David, This is for an installment loan that is VERY high risk. No credit check, or anything like that. But that isn't the issue at stake. The issue is how are they coming up with the formula for equal bi-weekly payments at that APR?. To answer your question, YES, it does pay it off: monthly principle interest balance 251.96 70.64 181.32 2,429.36 251.96 27.72 224.24 2,401.64 251.96 30.27 221.69 2,371.37 251.96 33.07 218.89 2,338.30 251.96 36.12 215.84 2,302.18 251.96 39.45 212.51 2,262.72 251.96 43.10 208.86 2,219.63 251.96 47.07 204.89 2,172.55 251.96 51.42 200.54 2,121.13 251.96 56.17 195.79 2,064.97 251.96 61.35 190.61 2,003.61 251.96 67.01 184.95 1,936.60 251.96 73.20 178.76 1,863.40 251.96 79.96 172.00 1,783.44 251.96 87.34 164.62 1,696.11 251.96 95.40 156.56 1,600.71 251.96 104.20 147.76 1,496.50 251.96 113.82 138.14 1,382.68 251.96 124.33 127.63 1,258.35 251.96 135.81 116.15 1,122.54 251.96 148.34 103.62 974.20 251.96 162.04 89.92 812.17 251.96 176.99 74.97 635.17 251.96 193.33 58.63 441.84 251.96 211.18 40.78 230.67 251.96 230.67 21.29 0.00
Victoria
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will (p*t*r)/100 work for you? or you may have to just fine tune this basic formula. if you can elaborate your requirement more, then i can explain with better clarity.
The only formaula that seems to work is one over 364 days.. Here is it: =PMT(APR/364 x Number of payments x 1 x Amount finaned)x -1 - APR But shouldn't it be 365 days? :suss: I did this on excel and that's all I can come up with. Let me know what you think.:confused:
Victoria
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I want to figure out the formula in getting the following: $2500 loan amount 239.9961% APR 12 month term Bi-weekly payment (26 payment total) What is the formula for each payment? What is the formula for the Total Finance Charge? How can I calculate Bi-weekly equal payments??:doh: We know that each payment will be $251.96 (Equal Payments) But how have they come up with such formula?? And where? HELP!?!?!?!?!
Victoria
see http://www.public.asu.edu/~subhro/pup622/localfinance/sld008.htm[^] but substitute the MONTHLY RATE for 'r' in the formula if you are using 'n' as the number of months. Assuming you actually meant 23.99 APR, (which equates to ~ 2% per month) the formula gives: $236.40. I built a quick spreadsheet to verify that this payment amount will in-fact pay off the debt in 12 months, and it does. This payment number is slightly different than your number, so I'm wondering if your interest is being compounded differently. David
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Hi David, This is for an installment loan that is VERY high risk. No credit check, or anything like that. But that isn't the issue at stake. The issue is how are they coming up with the formula for equal bi-weekly payments at that APR?. To answer your question, YES, it does pay it off: monthly principle interest balance 251.96 70.64 181.32 2,429.36 251.96 27.72 224.24 2,401.64 251.96 30.27 221.69 2,371.37 251.96 33.07 218.89 2,338.30 251.96 36.12 215.84 2,302.18 251.96 39.45 212.51 2,262.72 251.96 43.10 208.86 2,219.63 251.96 47.07 204.89 2,172.55 251.96 51.42 200.54 2,121.13 251.96 56.17 195.79 2,064.97 251.96 61.35 190.61 2,003.61 251.96 67.01 184.95 1,936.60 251.96 73.20 178.76 1,863.40 251.96 79.96 172.00 1,783.44 251.96 87.34 164.62 1,696.11 251.96 95.40 156.56 1,600.71 251.96 104.20 147.76 1,496.50 251.96 113.82 138.14 1,382.68 251.96 124.33 127.63 1,258.35 251.96 135.81 116.15 1,122.54 251.96 148.34 103.62 974.20 251.96 162.04 89.92 812.17 251.96 176.99 74.97 635.17 251.96 193.33 58.63 441.84 251.96 211.18 40.78 230.67 251.96 230.67 21.29 0.00
Victoria
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see http://www.public.asu.edu/~subhro/pup622/localfinance/sld008.htm[^] but substitute the MONTHLY RATE for 'r' in the formula if you are using 'n' as the number of months. Assuming you actually meant 23.99 APR, (which equates to ~ 2% per month) the formula gives: $236.40. I built a quick spreadsheet to verify that this payment amount will in-fact pay off the debt in 12 months, and it does. This payment number is slightly different than your number, so I'm wondering if your interest is being compounded differently. David
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see http://www.public.asu.edu/~subhro/pup622/localfinance/sld008.htm[^] but substitute the MONTHLY RATE for 'r' in the formula if you are using 'n' as the number of months. Assuming you actually meant 23.99 APR, (which equates to ~ 2% per month) the formula gives: $236.40. I built a quick spreadsheet to verify that this payment amount will in-fact pay off the debt in 12 months, and it does. This payment number is slightly different than your number, so I'm wondering if your interest is being compounded differently. David
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Hi David, This is for an installment loan that is VERY high risk. No credit check, or anything like that. But that isn't the issue at stake. The issue is how are they coming up with the formula for equal bi-weekly payments at that APR?. To answer your question, YES, it does pay it off: monthly principle interest balance 251.96 70.64 181.32 2,429.36 251.96 27.72 224.24 2,401.64 251.96 30.27 221.69 2,371.37 251.96 33.07 218.89 2,338.30 251.96 36.12 215.84 2,302.18 251.96 39.45 212.51 2,262.72 251.96 43.10 208.86 2,219.63 251.96 47.07 204.89 2,172.55 251.96 51.42 200.54 2,121.13 251.96 56.17 195.79 2,064.97 251.96 61.35 190.61 2,003.61 251.96 67.01 184.95 1,936.60 251.96 73.20 178.76 1,863.40 251.96 79.96 172.00 1,783.44 251.96 87.34 164.62 1,696.11 251.96 95.40 156.56 1,600.71 251.96 104.20 147.76 1,496.50 251.96 113.82 138.14 1,382.68 251.96 124.33 127.63 1,258.35 251.96 135.81 116.15 1,122.54 251.96 148.34 103.62 974.20 251.96 162.04 89.92 812.17 251.96 176.99 74.97 635.17 251.96 193.33 58.63 441.84 251.96 211.18 40.78 230.67 251.96 230.67 21.29 0.00
Victoria
Use the same formula I provided earlier, but substitute 2.4/26 (the biweekly rate) into the formula for 'r' and 26 for 'n'. It gives a different answer than 251.96, but I see that your first principle amount is very high in comparison, indicating that your first payment is being made before the full 2-weeks have expired. This will change your payment amount. David ps. is it really legal to charge that much interest where you live? I've heard of such things, but I think it's a disgrace. These kinds of loans are specifically designed to rape the poor.
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Use the same formula I provided earlier, but substitute 2.4/26 (the biweekly rate) into the formula for 'r' and 26 for 'n'. It gives a different answer than 251.96, but I see that your first principle amount is very high in comparison, indicating that your first payment is being made before the full 2-weeks have expired. This will change your payment amount. David ps. is it really legal to charge that much interest where you live? I've heard of such things, but I think it's a disgrace. These kinds of loans are specifically designed to rape the poor.
Ok.. I'll try it. Yes, it is legal, in most states. I can see where some people whould call them loan sharks, but I also see their side to it. These are companies that do not do any type of credit check. All they require is a valid drivers license, current paystub, ative checking account and phone bill. Who knows what they have out there. If I was going to lend someone $1000 who had a track history of late payment, I would want $1500 back in 6 months. These types of loans are so risky! Especially because more than half have bad credit. Now, let't say someone needs a loan until their bonus checks comes in in 2 weeks, and they need to make rent, car payment and extra money for food. (We all know that a lot of people live check to check). They take a loan for $1,000; in 2 weeks they pay $1,090.00! So it cost them $90.00 to take out a 2 week loan! NOT BAD. And it kept them from being negaitive in their accounts or get charged NSF fees, etc.. I say short term, it's worrth it. Long term.. NOT AT ALL!
Victoria
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Can you forward me that spreadsheet? Is it in Excel? The APR is in fact 239.9961%.
Victoria
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I don't have anything. But you can send it to vtoriagarcia@aol.com Thank you!
Victoria
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Ok.. I'll try it. Yes, it is legal, in most states. I can see where some people whould call them loan sharks, but I also see their side to it. These are companies that do not do any type of credit check. All they require is a valid drivers license, current paystub, ative checking account and phone bill. Who knows what they have out there. If I was going to lend someone $1000 who had a track history of late payment, I would want $1500 back in 6 months. These types of loans are so risky! Especially because more than half have bad credit. Now, let't say someone needs a loan until their bonus checks comes in in 2 weeks, and they need to make rent, car payment and extra money for food. (We all know that a lot of people live check to check). They take a loan for $1,000; in 2 weeks they pay $1,090.00! So it cost them $90.00 to take out a 2 week loan! NOT BAD. And it kept them from being negaitive in their accounts or get charged NSF fees, etc.. I say short term, it's worrth it. Long term.. NOT AT ALL!
Victoria
There's been exactly *one* actual study on this sort of lending. With the cooperation of a South African bank they took a group of people who were just under the approval threshold for a loans with average values of ~1000, and 4 monthly payments of ~360 (don't recall if values were in US or local currencies) and granted approval to half of them anyway. They then did a 6mo followup on both groups and found the ones that had been granted the loan were on average better off financially than those that had been denied. I read about it in a recent issue of The Economist, but since I don't save back issues I can't tell you which one it was.
-- If you view money as inherently evil, I view it as my duty to assist in making you more virtuous.
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Can you forward me that spreadsheet? Is it in Excel? The APR is in fact 239.9961%.
Victoria
Vtoria wrote:
The APR is in fact 239.9961%
Sorry, but that is just insane... Only an idiot would go with that.
"Find it your bloody self - immediately!" - Dave Kreskowiak
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I want to figure out the formula in getting the following: $2500 loan amount 239.9961% APR 12 month term Bi-weekly payment (26 payment total) What is the formula for each payment? What is the formula for the Total Finance Charge? How can I calculate Bi-weekly equal payments??:doh: We know that each payment will be $251.96 (Equal Payments) But how have they come up with such formula?? And where? HELP!?!?!?!?!
Victoria
Take a look at this article from the FAQ of Dr. Math: http://www.mathforum.org/dr.math/faq/faq.interest.html[^] In an installment loan, a lender loans a borrower a principal amount P, on which the borrower will pay a yearly interest rate of i (as a fraction, e.g. a rate of 6% would correspond to i=0.06) for n years. The borrower pays a fixed amount M to the lender q times per year. At the end of the n years, the last payment by the borrower pays off the loan. The amount of the fixed payment is determined by: M = P * i / [ q (1 - [1+( i / q)]^(-n* q) ) ] M = 2500 * 2.399961 / [26 (1 - [1+(2.399961/26)]^(-1*26) ) ] 674653127756771870877187207 (which, when rounded to 2 dp is $256.61) The total amount paid by the borrower is Mnq, and the total amount of interest paid is I = Mnq - P: I = M * n * q - P I = 256.60 * 1 * 26 - 2500 I = 4171.7754098132167606864280686738 (which, when rounded is $4171.78) That is a lot of interest! Jerry http://www.mathforum.org/dr.math[^]