For a standard, year $16000 home/car loan 7.25% APR with payments due at the end of the month, calculate the monthly payment:
Calculate Months:
Your loan term is for years.
Months = 12 * Years
Months = 12 *
Months = 0
Now calculate monthly Annual Percentage Rate (APR):
APR = Annual APR
12
APR = 7.25
12
APR = 0.0060416666666667 <----- This is the effective interest each month.
Now calculate Annual Percentage Yield (APY):
APY = ((1+APR)12 - 1) * 100%
APY = ((1 + 0.0060416666666667)12 - 1) * 100%
APY = ((1.0060416666667)12 - 1) * 100%
APY = (1.0749582974213 - 1) * 100%
APY = 0.074958297421329 * 100%
APY = 7.5% <----- What you actually pay in interest with monthly compounding.
Calculate our monthly loan payment:
Monthly Payment = Loan Amt * APR
1 - (1/(1 + APR))n
Monthly Payment = 16000 * 0.0060416666666667
(1 - (1 /(1 + 0.0060416666666667))0
Monthly Payment = 96.666666666667
(1 - (1 / 1.0060416666667)0
Monthly Payment = 96.666666666667
1 - 0.99399461586250
Monthly Payment = 96.666666666667
1 - 1
Monthly Payment = 96.666666666667
0
Monthly Payment = 0
Now calculate the total number of payments you will make:
Total Payments = Monthly Payment * Months in the Loan
Total Payments = 0 * 0
Total Payments = $0.00
You will end up paying $0.00 - $16,000.00 = $-16,000.00 above the principal on this loan.