For these loans, you are charged interest based on the original loan amount. Every month, you will pay a fixed monthly interest charge and a fixed amount to repay the principal, i.e. your original loan. Hence, your monthly payments are a fixed amount and will be constant throughout the loan period.
The advertised interest rate is known as the Simple Interest Rate. It can often be deceiving, as consumers end up getting charged far more in interest than they expect. A common example of a flat rate is a car loan.
Let’s run through an example.
* A nominal rate means that this is the rate charged for 1 year. This value requires adjusting to your compounding period, which in this case, will be your instalment period of one month. Most rates you see are given as a nominal rate.
Monthly interest payments
= interest rate adjusted to monthly x original loan amount
= (0.035 x 1/12) x $2,000
= $5.83
Monthly principal repayment
= loan amount / total number of months
= $2,000 / (5*12)
= $33.33
Total monthly payments
= monthly interest payments + monthly principal repayments
= $5.83 + $33.33
= $39.16
Total payments over the life of the loan came to $2,350, of which $350 was for interest payments.
1. Click the link to the read-only document
https://docs.google.com/spreadsheets/d/1vcn6O3MHHFnXjF8pQF3FOwEAHlIhHKKFje55sPIXCU0/edit?usp=sharing
2. Make a copy of this template for your own use
[Open document > File > Make a copy]
3. Use the template for your own personal use!
MoneyFitt (ProConnect Technologies Pte Ltd) is not responsible for any errors or omissions, or for the results obtained from the use of this information and shall also not be liable for any damage or loss of any kind, howsoever caused as a result (direct or indirect) of the use of the app and its features, including but not limited to any damage or loss suffered as a result of reliance on the app. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. The information contained is not intended to be a source of advice or credit analysis with respect to the material presented. Any ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial, tax or legal professional and independently researching and verifying information. We do not provide any financial advice, nor are we licenced to.
.svg)
.svg)
.svg){kind=icon}
