How to Calculate Your Monthly Interest Payment on an Installment Loan

Save

If you are considering getting an installment loan, you not only want to know your monthly payment but also how much consists of interest. Calculating that figure may seem an intimidating prospect but it is actually not difficult. Simply follow a few steps to get that information so you will have a better sense of how to proceed with your loan deliberations.

  • Inspect your statement or paperwork to find the APR of your loan. Your monthly interest payment is based on the APR.

  • Divide your APR by 12 because most loans are based on a daily accrual and monthly interest billing.

  • Locate or calculate your beginning loan balance for the period or statement in question.

  • Multiply the result from step two by your opening balance figure from step three.

  • Get a result that is the approximate monthly interest accrued during the month in question. Lowering your installment loan balance requires a monthly payment in excess of this interest payment. This calculation applies to all installment loans such as auto loans, mortgage loans and others and can apply to credit cards in certain circumstances such as single-cycle billing with no principal accumulation via spending.

Tips & Warnings

  • Most creditors have specific rules in the fine print of your loan; thus, your actual interest payment may vary slightly. However, this will provide an accurate rule of thumb for you to follow in calculating your monthly interest payment.

References

  • Photo Credit Photos.com/AbleStock.com/Getty Images
Promoted By Zergnet

Comments

You May Also Like

Related Searches

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!