How Do Banks Calculate Interest Rates On Loans?


2 Answers

Anonymous Profile
Anonymous answered
Is the interest rate on loans the same for everyone and it goes changing every month or it depends on your financial history?
jay jerome Profile
jay jerome answered

Banks calculate the interest on your remaining balances.

(APR/12) x (Remaining Balance) will give you the interest charged for one month.

Each month in which you have your loan, this is how interest is calculated.

If you have a fixed APR, the APR will remain the same throughout the loan.
If you have a variable APR, it may change from month to month.

If you have a fixed APR for N months, and a monthly payment of P, with
a loan amount of L.

Total Interest = PN - L.

You can also ask your bank to give you an amortization schedule that
shows how much of your payment is applied towards principle, and interest
month by month.

I would also as them to tell you how they calculate your monthly payments.

There is math formula used to calculate the monthly payments.

Ask for this at the bank where you want to take out your loan.

If they can't give it to you give me a shout.

I'm here to inform people how Math is used in everyday life.
There is so much Math with real life applications that people
need to know.


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