Formula for calculating interest payments?

[Jack Shearer]

Hello

My first post to this news group.

Please excuse a novice question but could someone please advise which
formula I should use to calculate the monthly/fortnightly payments which
would need to be made on an interest only loan.

I have used PMT and IPMT but my results don't quite correspond with other
online calculators. I really would like to be able to develop my own
calculations in Excel and be confident the resultrs are reasonably accurate.

Thanks for your advice.

Jack

 

[Ron Rosenfeld]

Hello

My first post to this news group.

Please excuse a novice question but could someone please advise which
formula I should use to calculate the monthly/fortnightly payments which
would need to be made on an interest only loan.

I have used PMT and IPMT but my results don't quite correspond with other
online calculators. I really would like to be able to develop my own
calculations in Excel and be confident the resultrs are reasonably accurate.

Thanks for your advice.

Jack

if it is an interest-only loan, then the payments would be given by the
formula:

=Interest_rate_per_period * Principal

So if your interest is quoted as yearly but your payments are monthly, you
would divide that number by 12.


--ron

 

[Fred Smith]

Interest only means you are not paying down any principal. You are paying
only the interest charged in a period. Therefore you can't use the financial
functions, because they all assume you will have the loan paid off by the
end of the term.

In your case, to calculate the monthly interest charge, use:

=AnnualRate * Principal / 12

To calculate the fortnightly charge:

=AnnualRate * Principal / 26

 

[Jack Shearer]

Thanks guys.

Of course this is the method. Benn quite a while since I worked with
figures and was looking for a complicated process. Well that's my excuse
and I'm sticking to it.

Jack