How to calculate loan repayments

hussey

does anyone know how this works

say I borrow 1000
over 2years at 10% APR

I thought it was
1000x E^(2x0.1)

as in amount multiplied by E to the power of (years by interest rate)

But this gives me a different figure than BOI loan calculator

Borzoi

Your formula is right(ish) if you pay the whole loan off at the end of the two years

€1000 x (1.1)^2

Principal =€1000, Year = 2, Rate =100+10%=1.1

Total payback €1210

But the banks work on a reducing balance method, so interest is generally less, so payments are less.

hussey

http://www.maths-help.co.uk/Knowldge/Num/Repay/Question.htm
found this .. it is pretty good

daveg

I'm looking to borrow a €1000 for my car insurance. Having done the research I can tell you one direct is probably the cheapest you'll get. You end up paying €41 back over a year.... feck all really.

dsab

That can't be right.... because if you multiply 41 by 12 months, then weoul you pnly pay back 492 Euros for 1000 you borrowed. No bank could afford this kind of business. :-)

jesus_thats_gre

Or if its was 41 weekly, that would be over 2000. I presume it is 21 you meant?

Victor

Originally posted by daveg
You end up paying €41 back over a year.... feck all really.

I think he means €41 interest.

dod

Did up a neat little configurable spreadsheet to work through your payment periodicity, reducing balances, cumulative interest, etc. for periods from 1 year through to 30 years, but when I tried to attach it to this message, it was 325k, so I couldn't post it here. Sorry!

daveg

Originally posted by Victor
I think he means €41 interest.

Correct. Thanks Victor.