Calculate rates of credit – That’s how it works
How do I calculate
It’s not always the Internet that is “on hand” when you want to do a little calculation on a short-term basis. But the school time is long ago. The formulas for calculating a monthly loan installment, the annual percentage rate for a car loan or a loan linked to the depreciation of the computer system are no longer in everyone’s mind.
For this reason we supply here the most important formulas with calculation examples, so that these, stored in the mobile phone, allow a calculation also on the way.
There is a distinction between the following classical financing types:
- Payday Loans and Mortgage Loans (annuity loan) – the rate remains the same as the repayment installment increases and the interest rate decreases
- Redemption loan (installment loan) – the installment is reduced by keeping the repayment installment constant and reducing the interest component
Suppose you want to buy a car for 30,000 euros. You can spare 500 euros per month. The bank charges an interest rate of four percent a year. The question now is how long do you need before the loan is paid off. First of all, you need to determine the amount of interest that is in the $ 500 you want to spend every month. The interest rate is always calculated only on the remaining debt, with each repayment you pay for a loan with a fixed monthly rate less interest, but a higher repayment.
The interest is relatively simple:
30,000 * 4/100/12 = 100 euros a month. This means that 400 euros will be available for repayment as part of the first installment. Theoretically, a new calculation would only have to be made for each month. In the second month, the calculation looks like this:
30,000 – 400 = 29,600
29,600 * 4/100/12 = 98.67
There are now available for the repayment 401.33 euros. Approximately calculated is the term 6.25 years without taking into account the increasing repayment. Calculated in detail, but with annual amounts (initially 1,200 euros interest and 4,800 euros repayment), the following picture arises with monthly repayment offset:
The effective term is 68 months.
The credit costs amount to 3,527.33 euros. The formula to calculate the annual percentage rate is
This results in the following calculation: (3,527.33 * 24) /30.0000*69 = 84655.92/2.070.000 = 0.0408 => 4.08 percent.
You find that a monthly installment of $ 500 is too high and you prefer to pay less. The initial repayment in this example is 16 percent. If we reduce this to ten percent, a monthly burden of € 350 remains. Of course this has an impact on the duration of the financing. The financing period is now roughly calculated (30,000 * 10/100)/12 = 250 => 30,000/250 = 120 months.
The amount of the monthly installments, the interest burden and the sum of repayments and interest can interested readers with our Payday Loan calculator
or car loan calculator based on daily updated by our editorial data of all available banks, credit intermediaries and credit platforms.
The procedure is basically the same, differs only in two points:
- The volumes are usually much higher.
- When calculating the annual percentage rate of charge, there may be other costs besides interest.
Provided you need a loan of 200,000 euros for your dream home. They opt for a ten-year rate fix with an interest rate of 1.5 percent APR and a three-percent repayment. The annual annuity is 9,000 euros, the constant monthly rate 750 euros. At the end of the fixed interest rate, there is still a residual debt of 135,309, 83 euros in the books.
The total term of the loan would be 28 years with the same annuity. If the repayment rate is halved to 1.5 percent initially, the loan term is 47 years.
Assuming that there is still an agency fee of 0.75 percent for the loan and the bank calculates tax costs of one percent, the following appears for the calculation of the annual percentage rate:
(25,309.83 + 1,500 + 2,000) * 24/200,000 * 121 = 691,435.92/24,200,000 = 0.0285 = 2.85 percent.
The amount of the monthly installments, the interest charge and the sum of repayments and interest can be determined interested readers with our mortgage calculator based on daily updated by our editors of all available banks, credit intermediaries and credit platforms.
Redemption loans or repayment loans are often used for commercial financing. The loan term and the residual debt of the loan are linked to the amortization period. Unlike an annuity loan, the monthly rate does not stay the same but decreases with each payment.
For example, say you have purchased a computer system for $ 20,000 for your business. The amortization period is five years. The interest rate is six percent a year. This results in the following pattern for the calculation:
(20,000+ (20,000 * 6/100)) = 5,120 euros in the first year. Of this, € 4,000 is due for repayment and € 1,200 for interest. The remaining debt is still 16,000 euros. In the second year, therefore, again fall to 4,000 euros repayment, but only 960 euros interest.
The repayment loan in the annual course:
The monthly rate in the first year is 426.67 euros, the last installment still 353.33 euros.
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