How to Calculate a Fixed Personal Loan at 6%
With a fixed rate, the monthly payment will always remain the same for the life of the loan so you can budget for the amount you have to pay. In addition to the interest rate, you also need the term of the loan, the amount borrowed and the number of payments per year that will be made to calculate the monthly payments for the fixed rate personal loan.
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Instructions
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1
Determine the term of the loan. This is the length the borrower has to repay the loan.
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2
Determine how often payments will be made. Most loans require monthly payments, or 12 payments per year.
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3
Determine the periodic rate by dividing 6 percent by the number of payments made per year. For example, if you use monthly payments, you would divide 6 percent by 12 to get 0.5 percent for the periodic rate.
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4
Determine the number of payments over the term of the loan by multiplying the number of years in the term of the loan by the number of payments per year. For example, if you were using monthly payments for five years, the total number of payments would be 60.
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5
Calculate the monthly payments on the loan using the following formula where P is the periodic rate from Step 3, N is the number of payments over the life of the loan, and B is the amount borrowed:
Monthly Payment = (P / (1 - (1 + P)^-N))*B
For example, if you borrowed $5,000 at an annual rate of 6 percent for five years, the monthly payments would be $96.66.
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Tips & Warnings
Personal loans usually have higher interest rates than other loan types because they are unsecured, meaning there is nothing that the lender can seize if the loan is not repaid.
References
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