How do they calculate the mortgage payment with interest?
Essentially they run a formula such that if you paid 6% interest on the outstanding balance at all times and you wanted to pay off the complete balance in 30 years; what would the mortgage payment have to be? Then they work backwards from there. To understand the formula better than that takes higher math skills that I haven't used in many years (and who needs to - my calculator works just fine). Here is an online calculator that computes payments for you if you are interested. http://www.mortgage-calc.com/mortgage/si...
How is interest calculated into monthly home payments?
What you said is right. Thats why home loans at such great value for banks. They cant lose. Even if you made no repayments they are still ahead. (Lets ignore taxs etc for ease of discussion.) Your $200,000 house requires a deposit of 20%. So the loan is for $180,000. At $1200 per month it would take 16 moths of no payment to reach the deposit value. Lets assume it took the bank that long to get you out and another 12 months to sell it. Thats another $14,400 in repayments value above the deposit. By luck they sold it for 200,000 that leaves $14,400 outstanding. You are still required to pay this amount to the bank. So the bank doe not lose. In fact the only way the bank could lose is with a repeat of the above scenario but this time you burn the place to the ground. It also had no building insurance and you died in the fire broke. There is no one to chase and no money in the estate to claim on. Bad luck Mr Bank. How many time do you think that is going to happen to the poor old bank.
How do banks calculate how much to pay you in interest every month?
There are a number of factors which go into interest calculation from a bank:1. The interest rate2. Date from which interest is applied - date of deposit, date of realization on account3. Balance subject to interest - Daily balance accrual, Average daily balance ( As mentioned by Eric Rosenberg), End of Month Balance4. Number of days in a year used for calculation - 360 days/365 days/365 or 366 days(depending on the year)While ADB ( Average Daily Balance) is the most predominant method of charging, especially to ensure no gaming happens as mentioned by you, there are other methods of interest accrual which may be done by the bank as well. These include:1. Daily Accrual - Balance at end of day is used to calculate the interest application. This is then compounded on until end of the month to get the final application of interest2. Monthly Accrual - Balance at the end of month is used to compute the interest to be applied to your account.Usually the bank will indicate the method of interest accrual in the fine print document which they provide with the account. If there is monthly accrual then gaming as you mentioned is possible. If there is daily accrual or average daly balance accrual then gaming is not possible.
How is a car loan interest calculated?
The dealership is correct. (I actually got 306.99 per month, but close enough.) The difference is due to the time value of money. The longer you borrow the money, the more interest you pay. If you were just giving them 5.25% on top of the cost of the car on the day you bought it, then you would be correct and the total would be 19,918. But the dealership is going to charge you interest each and every month that you've got a loan outstanding. For example, borrowing for 72 months means your total is 21,960. If you borrowed for 60 months, your payments would be higher at 359.31, but your total would be lower -- only 21,559. You save about $400 by paying the car off a year sooner, because the dealership wasn't charging you to borrow that money for an extra year. There are formulas you can use to calculate an actual payment under these terms. Post a question if you're interested and I (or someone else) will certainly provide one.
When and how is the interest on ppf sum is calculated?
Hi,Interest on balance in your PPF account is compounded annually and credited at the end of each financial year.However, this interest is calculated every month. It is calculated between the 5th and the last day of every month on the minimum balance in your account.So if you are planning on investing monthly, make sure you invest on or before the 5th of every month (i.e. deposit your money on or before the 5th of every month).Moreover, you can use PersonalFN’s PPF Calculator to get approximate future value of your PPF account contributions and make informed financial decision.(Image Source: http://www.freeimages.com)Regards
What is the formula for calculating the monthly payment for an Auto Loan?
$192.48 is the correct payment. Using the formula below -- P = principal = 9606.00 I = annual interest rate = 0.075 L = 5 years Then: J = monthly interest = 0.075/12 = 0.00625 N = number of months financed = 12 * 5 = 60 Plug all these values into the formula below and you will get the monthly payment. Any insurance, etc. will be added to this amount. FYI -- How you were figuring the amount is incorrect on a couple of points. First, you only calculated interest for 1 year ($720.45) For 5 years, interest would be more like $3600! However, you don't owe that much interest over the life of the loan, because you keep making payments. Each payment reduces the amount you owe, thus reducing the interest burden on the outstanding principal. Although the payment amount doesn't change over the life of the loan, how it gets divided up does. Early on, most of your payment goes to interest, while toward the end of the 5 years, most of your payment applies toward principal. good luck!
Does the Airtel payments bank calculate interest on a daily basis or per annum?
Dear Customer, Greetings from Airtel Payments Bank! This is with reference to your email wherein, you inquired about interest calculation for your Airtel Payments Bank account number 9413860281. We do under stand your concern. We would like to inform you that the Interest is calculated on daily closing Balance and is being paid monthly. Interest amount will be credited on first of every month in your Savings Bank Account. Calculation of interest is :- Day End Amount * 7.25 / 100 * No of days in a month /365. For ex. Day 1 Closing balance * 7.25/100 + Day 2 Closing balance * 7.25/100 + Day 3 Closing balance * 7.25/100........* No of days in a month /365. If you have any other queries, feel free to reach out we will be glad to help in any way we can! Thanks for being a part of the Airtel Payments Bank family!