If you want to calculating a loan installmentOur online calculator allows you to know the amount you will have to pay based on the money borrowed and the interest if any, since for low amounts, there are banks that offer payroll advances without any type of commission for their clients.
To calculate the installment of the loan you have requested or are going to request, simply fill in the data requested by our tool and after clicking on the calculate button you will see the amount of interest generated by the loan and the amount of each installment.
Formula for calculating interest on a loan
When requesting money in advance from a financial institution, we are usually charged a series of fees. interest on the amount we will need. This interest is expressed as a percentage but is not calculated as a simple percentage of the total as we are used to.
In loans with a fixed monthly payment, the french loan model (the one used in Spain) in which the first installments are the ones where we pay most of the interest. Because of this, we have to introduce the concept of outstanding principal to calculate the interest on the loan, i.e. the money we have left to pay.
The formula for calculating the interest we will use will be:
Interest = (outstanding principal x interest rate)/12
For example, if we request a loan of 3000 euros with a 10% interest rate. to be repaid in 12 months, we have to pay the following amount of interest in the first installment:
Interest = (3,000 x 0.1)/12 = 25
¿How interest payments will evolve as we amortize the loan over the 12 months? Let's take a look at the following amortization table for the requested loan:
|Quota no.||Amount of installment||Interests||Amortization||Capital outstanding||Amortized|
|1||263,75 €||25,00 €||238,75 €||2.761,25 €||238,75 €|
|2||263,75 €||23,01 €||240,74 €||2.520,51 €||479,49 €|
|3||263,75 €||21,00 €||242,74 €||2.277,77 €||722,23 €|
|4||263,75 €||18,98 €||244,77 €||2.033,00 €||967,00 €|
|5||263,75 €||16,94 €||246,81 €||1.786,20 €||1.213,80 €|
|6||263,75 €||14,88 €||248,86 €||1.537,33 €||1.462,67 €|
|7||263,75 €||12,81 €||250,94 €||1.286,40 €||1.713,60 €|
|8||263,75 €||10,72 €||253,03 €||1.033,37 €||1.966,63 €|
|9||263,75 €||8,61 €||255,14 €||778,23 €||2.221,77 €|
|10||263,75 €||6,49 €||257,26 €||520,97 €||2.479,03 €|
|11||263,75 €||4,34 €||259,41 €||261,56 €||2.738,44 €|
|12||261,56 €||2,18 €||259,38 €||0,00 €||3.000,00 €|
As you can see, during the first few months is when we pay most of the interest The loan will be granted to the entity that has granted us the money, so if we finalize the loan early, they will have obtained most of the benefits of the operation.
How to calculate a loan installment in Excel
If you have Excel installed on your computer, there is a function for calculating loan payments in Microsoft's spreadsheet program.
To get your loan payment in Excel, open a new sheet, place yourself in an empty cell and type the following formula:
As you can see, the function has 5 input arguments that we explain below:
- Rateis the annual interest that the loan contracting has. We divide it by twelve since most loans taken out today are paid on a monthly basis.
- Nperis the number of installments we have to repay the amount of money borrowed.
- Go tois the amount of money that we are going to borrow.
Therefore, if we want to calculate the loan installment we requested in the previous point, the Excel formula will be written as follows:
The value will be negative, but that is because it is an expense and Excel expresses it that way. If you want the value to be positive, simply multiply by -1.