How to Calculate Payments on a Subprime Loan
The most common type of loan, the fixed rate loan, offers set payment amounts over a pre-determined number of years. Subprime loans usually charge high interest rates to pay extra to the lender in order to offset the additional risk if the property goes into default.
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Instructions
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1
Find out the interest rate, principle (amount owed), number of payments per year, and the number of years it takes to repay the loan. Verify that the loan is a standard fixed rate loan.
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2
Use an online loan payment calculator. Many free calculator services are available. Look for a loan payment calculator service that doesn't require you to sign up, register, or pay (see Resources).
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3
Have the information from Step 1 available to enter into the loan calculator. Most calculators ask for the rate as a whole number, but some require the percentage as a decimal. For example, 12 percent is input as 0.12 for the interest rate.
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4
Enter the loan term as months or years. If you must enter the loan term in months, multiply the number of billing periods in the year by the total number of years it takes to repay the loan. For example, 12 billing periods per year over 30 years would be 360 months.
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5
Enter the information and follow the prompts. Some calculators automatically display the result on the screen, others require you to press a button before performing the calculation.
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6
Take the calculation from Step 5 and add costs like property taxes, homeowner's insurance premiums and private mortgage insurance (PMI) if you put down less than 20 percent of the house's value for the total amount of your mortgage payment.
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Tips & Warnings
Most loan payment calculators deal only with fixed rate loans. They don't accurately reflect payments for the entirety of a graduated repayment, balloon payment, or other non-fixed payment schedule.
Subprime loans are typically offered to buyers with lower credit scores.
