How to calculate equal repayments
Equal payments are a common repayment method when taking out a loan or installment plan. It refers to the same repayment amount each period, including principal and interest. This article will introduce in detail the calculation method of equal repayment and help you better understand through structured data.
1. Basic concepts of equal repayment
Equal repayment, also known as equal principal and interest repayment, means that the borrower repays the loan principal and interest in equal amounts every month. The characteristic of this method is that the monthly repayment amount is fixed, which facilitates budget planning. The following is the core calculation formula for equal repayment:
| variable | meaning |
|---|---|
| P | Loan principal |
| r | Monthly interest rate (annual interest rate ÷12) |
| n | Number of repayment months |
| M | Monthly repayment amount |
2. Calculation formula for equal repayments
The monthly repayment amount (M) is calculated as:
| M = P × r × (1 + r)^n ÷ [(1 + r)^n - 1] |
Among them:
3. Calculation examples
Assuming you have a loan of RMB 100,000 with an annual interest rate of 5% and a loan term of 5 years (60 months), the monthly repayment is calculated as follows:
| Project | numerical value |
|---|---|
| Loan principal (P) | 100,000 yuan |
| Monthly interest rate (r) | 5% ÷ 12 ≈ 0.004167 |
| Number of repayment months (n) | 60 months |
| Monthly repayment amount (M) | 100,000 × 0.004167 × (1 + 0.004167)^60 ÷ [(1 + 0.004167)^60 - 1] ≈ 1,887.12 yuan |
4. Advantages and disadvantages of equal repayment
Advantages:
Disadvantages:
5. The difference between equal repayment and equal principal
Equal repayment (equal principal and interest) and equal principal are two common repayment methods. The following is their comparison:
| Comparative item | Equal principal and interest | Equal amount of principal |
|---|---|---|
| Monthly repayment amount | Fixed | Decreasing month by month |
| total interest | higher | lower |
| Suitable for the crowd | Stable income earner | Those with higher incomes |
6. How to choose the repayment method?
When choosing a repayment method, you need to decide based on your own financial situation and future income expectations:
7. Summary
Level repayment is a common loan repayment method that reduces borrower stress by fixing monthly payments. Mastering its calculation formulas and features can help you better plan your finances. If you have loan needs, it is recommended to choose the appropriate repayment method based on your own situation.
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