How it is calculated
An annuity keeps the payment level: early on, most of it is interest, and later the share that repays the debt grows. A declining scheme repays an equal piece of the debt every month, so the payment falls.
The schedule is rounded to the minor unit. A bank may differ by one currency unit because of the payment date and its own rounding. There is a single early payment in the calculation, and it is applied in the month you choose, after the ordinary charge.
Payment = S × i × (1 + i)^n / ((1 + i)^n − 1), i = rate / 12
Where the numbers come from
- Loan amount
- Rate — unit in the field: % per year
- Years — unit in the field: years
- Extra months — unit in the field: mo
- Plan
- Extra payment — 0 if there is no extra payment.
- In which month — unit in the field: month
- Where to apply the extra payment
Example
100 000 currency units at 12% a year for 12 months, as an annuity, gives a payment of about 8 884,88 currency units. The extra interest is in the total and, line by line, in the schedule.
Questions
Which to choose: an annuity or a declining payment?
At the same rate, the declining schedule costs less in extra interest, but the early payments are higher. An annuity is easier when the budget has to stay level.
Is the rate entered as a yearly rate?
Yes. The calculator divides it by 12 for the monthly percent.
Does an extra payment shorten the term or lower the payment?
That choice is separate. “Shorter term” keeps the payment. “Smaller payment” keeps the original number of months.