Amortization and Annuity Payments

The pro version of the plugin offers the option to calculate repayments using the standard annuity formula:

P = rC / (1 – (1 +r)-n)

Where:

P = repayment amount
r = interest rate per period (as a decimal, eg: 2% = 0.02)
C = Current loan amount
n  = number or repayments

However, there are two methods of calculating the interest rate per period. The simple method is to divide the APR by the number of periods per year. This is the system used in the USA. The method used in Europe is to convert the APR to get the rate per period. The plugin offers options for both methods.

The example below uses the US method of calculating amortization repayments:

£1000     £10000
1 year     36 years
Your monthly repayments will be at
Total you will Pay:
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Change the settings and compare with the results on this page: amortization-calc.com or bankrate.com

This example uses European method of calculating amortization repayments:

£1000     £10000
1 year     36 years
Your monthly repayments will be at
Total you will Pay:
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Test the calculations in Europe using this: moneysupermarket.com. or mortgagecalculator.net

For more information on the annuity formula take a look at the Wikipedia page.

Need help? Ask here

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