![]() ![]() Normally you would set the "Payment Method" to "Arrears" for a loan. The term (duration) of the loan is a function of the "Number of Payments" and the "Payment Frequency." If the loan is calling for monthly payments and the term is four years, then enter 48 for the "Number of Payments." If the payments are made quarterly, and the term is ten years, then enter 40 for the "Number of Payments." This calculator will solve for any one of four possible unknowns: "Amount of Loan," "Number of Payments" (term), "Annual Interest Rate" or the "Periodic Payment."Įnter a '0' (zero) for one unknown value. ![]() Ultimately, the borrower will pay less in interest charges with this loan method. Thus the payment amount declines from one period to the next. That is, unlike a typical loan, which has a level periodic payment amount, the principal portion of the payment is the same payment to payment, and the interest portion of the payment is less each period due to the declining principal balance. If the first payment is due when the loan originates set this option to "Advance." Otherwise, we'll assume the first payment is due one period after the origination date (when the funds are available) and in that case, this must be set to "Arrears."Ī fixed principal payment loan has a declining payment amount.
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