Taking out a loan saddles you with loan installments, or payments. Before agreeing to a loan, you need to make sure the monthly payments will be affordable, based on your financial circumstances. If you do not have a loan offer sheet with the installment payment listed, or you just want to check the installment calculations, you can work out the payments by hand.
Instructions
1. Change the annual percentage to a rate by dividing by 100. For example, if your loan has an annual interest percentage of 10.56 percent, you would divide 10.56 by 100 to get 0.1056.
2. Divide the annual rate by the number of payments made per year to find the interest rate per installment. For example, if you pay monthly installments on your loan, you would divide 0.1056 by 12 to get 0.0088.
3. Multiply the interest rate per installment by the amount you borrowed. Continuing the example, if you borrowed $8,350, you would multiply $8,350 by 0.0088 to get $73.48.
4. Add 1 to the interest rate per installment. In this example, you would add 1 to 0.0088 to get 1.0088.
5. Raise the Step 4 result to the power of the negative number of installments paid over the term of the loan. For this example, if the loan has 120 monthly installments, you would raise 1.0088 to the negative 120th power to get 0.34945493.
6. Subtract the Step 5 result from 1. In this example, you would subtract 0.34945493 from 1 to get 0.65054507.
7. Divide the Step 3 result by the Step 6 result to find the amount of each loan installment. In this example, you would divide $73.48 by 0.65054507 to find the loan installment is $112.95.
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