# Interest formula on Personal Line

G

#### Guest

Is there a formula for calculating interest on a Personal line of credit?
(there is no amortization date--it is an ongoing loan). Currently I owe
\$5,342.62 and interest rate is 5% (says calculated on a daily basis). My
interest on last statement was \$20.93 (28 day period, with a \$200.00
payment). I am adding on \$15,000 next month and want to be able to determine
when my original is all paid off.

Thanks for help.....

D

#### Dave O

What was the balance at the beginning of the 28-day period?

G

\$5,521.69

D

G

#### Guest

My payment was on Dec 29. It was 28 days from Dec 10 - Jan 6. Interest was
added on Jan 6. Note--if interest rates change my rate will also go
up....(it is currently prime 4.25 + .75)

D

#### Dave O

Hi, Elissa-
I thought I could nail this one, but I think there are too many details
about the specific terms of the loan that are leaving me in the dust.
I tried to set up a schedule of daily activity, but I couldn't get to
your exact numbers, I think for a couple reasons:
1. I went to the Federal Reserve web site
http://www.federalreserve.gov/releases/H15/data/d/prime.txt
to get a history by day of prime rate, and got numbers that were
different from yours (you quoted 4.25%, but the Fed says 5%).
2. I don't know if a single prime rate, maybe from the beginning of
the period, applies to the whole month, of if daily prime rates apply.
3. I'm not sure if your bank considers a year to be 365 days or 360.

Here are the headers and calculations I used: if you learn some
pertinent details you should be able to replicate the loan data. Also,
and they ought to be eager to help you understand the full details.

Column A: Date
Column B: Daily Balance Forward (equals previous day's ending bal)
Column C: Daily interest
Column D: Cumulative interest
Column E: Payments
COlumn F: Ending Balance (equals B+C-E when E is expressed as a
positive number)
Column H: Daily Prime rate per Federal Reserve

I used the formula that banks generally use to calculate daily
interest, in column C:
=ROUND((B5*((1+H5+0.75%)^(1/\$E\$1)))-B5,2) where E1 is the number of
days in a year. This can be 365 or 360.

Sorry I couldn't get this to work for you. If you'd like to see the
spreadsheet I ginned up, let me know and I'm happy to send it.
Dave O
CycleZen at yahoo dot com

G

#### Guest

Thanks for your help Dave....(I am from Canada--so our Prime rate would be
different) Appreciate your time though....I will try calling the bank--but
was hoping someone out there had already something set up for this--guess not!

Elissa