| Calculating loan repayments may seem complicated, | | | | calculate the total repayment amount. This example is |
| but with the right information, it's really quite simple. It's | | | | $5000 plus your interest of $1500, for a total of $6500. |
| also crucial information when considering a loan, so that | | | | This is the total amount you'll pay. |
| you will know exactly what you, and can't, afford. You | | | | Now determine the number of monthly payments, |
| can either use a loan payment calculator, a number of | | | | which is simply 12 (months) times 5 (years), making it |
| which are easily available online, or you can do the | | | | 60 payments for our example. Finally, to figure the |
| math yourself. To calculate the payments yourself, | | | | amount of your monthly payment, divide your total |
| simply follow the instructions below. | | | | amount ($6500) by the number of payments (60). You |
| The following example assumes you're borrowing | | | | can now see that your monthly payment for this |
| $5,000 for a term of 5 years, at a 6 percent interest | | | | example is $108.33 per month. |
| rate. | | | | Now that you see how easy it is to calculate loan |
| First, determine your total amount of interest by | | | | repayments, you can determine the impact that |
| multiplying the loan amount by the interest rate, and | | | | borrowing a different amount, over a different time, or |
| then multiply that by the number of years for the loan. | | | | at a different interest rate will have on your monthly |
| For this example, multiply $5000 x .06 x 5. Your total | | | | payments. If you are handy with excel, this is a great |
| interest is $1500. | | | | tool to prevent you from doing the same calculations |
| Next, add the total amount of interest to the principal to | | | | over and over again. |