reducible interest (1 Viewer)

[JayeK]

Can you please let me know how to calculate reducible interest on home loans

 

[DigitalFortress]

is that decreasing interest?

perhaps make the rate at which it is decreasing, turn it into a GP and get the sum?

nfi i'm just guessing. that finalfantasy dude can probs help you.

 

[acmilan]

Are there any specific examples you have?

 

[Cityboy]

It is the smae as calculating compound interest but instead of using the formula with 1+r/100 you chnage it to 1-r/100

 

[Calculon]

As far as I can remember you calculate the interest based on the balance at the end of each year, or month, or whatever however often the repayments are being made. So long as you are paying the loan off faster than the interest is accumulating you will find that the overall amount, and hence the interest, reduces over time. Also Cityboy I think that's incorrect, you still use A*(1+r/100), with A being the amount outstanding, but since A reduces over time so does the interest. If it worked the way you stated you could theoretically leave a loan to its own devices without making repayments and it would reduce itself to an infinitessimally small amount, which is not the case.

 

[Amogh]

ye.. as calculon said:
you just find the interest for that month/year
add it to the principle
subtract the payment that is being made
and voila you have the new amount left to pay..
you do this repeatedly until the amount is fully paid off.

i dont know if there is a shorter way of doing so.

 

[Timothy.Siu]

write out an equation describing the repayments and stuff.
you'll end up with a geometric series and then make an equation.

 

[Yuekiko]

ye.. as calculon said:
you just find the interest for that month/year
add it to the principle
subtract the payment that is being made
and voila you have the new amount left to pay..
you do this repeatedly until the amount is fully paid off.

i dont know if there is a shorter way of doing so.

Does anyone know a shorter way of calculating reducible interest over a number of years/ time periods without doing the equation over and over again?

 

[Sloppy1234]

Yuekiko Yea just write the equation for the first 3 terms then you should see the pattern.
Once you have the pattern just get a GP out of it and use the GP formula a(r^n - 1) / r-1