How to Figure Interest Payments on a Boat Loan
When someone buys a boat, many times a loan is figured out between the buyer and the boat dealership. This loan is set for a specific period, and has a fixed interest rate that usually is compounded monthly. Always carefully go over your financial records before engaging in a boat loan to make sure that you can really afford it. Knowing the formula to accurately calculate your monthly payments, including interest, is very importantly so you can budget it accordingly. The formula is simple to calculate once you have the necessary variables, which include the interest rate, the total loan amount, and how many months the loan will be for. A boat loan is calculated the same way as a car loan.
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Instructions
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1
Divide the annual interest rate given by the boat dealership by 12 to determine the monthly interest rate. For an annual interest rate of 5 percent, the result would be .0042 (.05/12)
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2
Multiply the amount of the boat loan by the number calculated in Step 1. If the boat loan is $20,000, then you would get 84 (20,000 x .0042).
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3
Add 1 to the number you obtained in Step 1 (.0042 + 1= 1.0042). Once you have done this, raise this number exponentially by the total months that it will take to pay the loan. Make sure the exponent is negative. If the loan was for 3 years (36 months), then 1.0042^ -36= .859948.
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4
Subtract the number you computed in Step 3 from 1. (1-.859948= .14).
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5
Divide the number you obtained in Step 2 by the number you calculated in Step 4. The resulting number is how much you will owe per month on your boat loan, including interest. (84/ .14= $600 a month).
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6
Multiply the number obtained in Step 5 by the total number of months you will be paying off the bank loan (in this case 36). Subtract the original loan amount from the resulting number to determine the total amount of interest paid. (36 x 600= 21,600). (21,600 - 20,000 = $1,600 in total interest paid.
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7
Divide the total interest by the total months to determine how much on average you paid in interest per month. (1600/36= $44.44 in interest per month)
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