You will need
- Calculator, paper, pen.
To calculate the amount of interest under the loan agreement, you need to determine how interest on the terms of the contract. If the contract is not agreed a different procedure for the calculation of interest on the loan, they are charged according to the classical scheme. This happens on the sum of the outstanding principal balance on the loan is based annual interest rate and the calculation period of the month.
The first interest amount on the loan is deducted from the full amount of the loan according to the formula: the loan amount multiplied by the annual interest rate in fractions, then divide by the number of days in the current year and multiply by the number of days in the payment period (month). Amount % = loan Amount * %interest in shares / 365 * 31
If the conditions of the loan agreement provide for the use of borrowed money all period with monthly payment only, the interest amounts without partial cancellation of the debt, the amount of interest on the loan is kept throughout the calculation period. I.e. monthly charges the same amount of interest for the use of money, and at the end of the period of the contract is paid the loan amount in full.
If the contract provides for monthly repayment of principal and interest, then calculating interest for subsequent periods is calculated from the sum of the actual balance owed on the loan. Ie is calculated monthly amount of repayment of principal and the interest amount according to the above formula so that the amount of principal is taken already, minus the paid part of the debt in the previous periods (the actual balance of the loan).
For the lender is the most lucrative scheme of interest is the monthly interest and the payment of the entire amount of the debt at the end of the loan period. For the borrower, more profitable conditions for partial monthly amortization of the loan and monthly interest paid for the use of money from the amount of the actual principal balance.
Before you sign the loan agreement carefully read the conditions of the loan. Depending on the scheme of charge of percent for the use of money reduces or increases the total overpayment (the total amount of interest) for the use of borrowed funds.