Slide 1

 

We are looking at the Loan Calculator. The Loan Calculator can be used to determine how much somebody can actually borrow or what should the Payment be over a specified Term and Interest Rate for a selected Principal Amount, etc.

 

Slide 2

 

The Loan Calculator uses 4 values: Principal, Payment or Installment, Interest per Payment or per Annum and number of Payments.

When any 3 of these values are specified, then the System will Calculate the remaining one. In other words, if we specify a certain Amount that is going to be borrowed and we specify a certain amount that is going to be borrowed and we specify the Term for instance, the Years and the Annual Interest percentage, then the System will calculate the Payment. Then we can also use the Amortize Function to see how this loan will Reduce over the Period until the Final Payment is done in the last Payment Period.

 

 

Slide 3

 

So I will do an example now where money is going to be borrowed at an annual Interest Percentage of 16.

 

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Slide 5

 

The Repayment Term in this case will be 5 years, which the System will then translate into 60 Monthly Payments.

 

Slide 6

 

 

 

Slide 7

 

And the Principal or Amount in this case, that will be borrowed, is $40,000.

 

Slide 8

 

The remaining answer that I need in this example having specified the other 3 is how much the Monthly Installment or Payment will be.

So I use the Function “Calculate Payment.”

 

Slide 9

 

 

 

Slide 10

 

The answer comes up as $976.13.

I will now use the Amortize Function because I want to see how this Loan will reduce over the Payment Period until the Final Installment will be shown in Payment Period number 60.

 

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Slide 12

 

 

 

Slide 13

So the Loan Calculator can be used to find the 4th answer when we specify any of the 3 of the 4 Elements that make up a formula for Loan Calculation.