All Topics / The Treasure Chest / how to calc Interest only loan

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  • Profile photo of avranjesavranjes
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    @avranjes
    Join Date: 2003
    Post Count: 58
    June 2, 2003 - 11:30 am

    can someone quickly explain to me how to calc the weekly repayment on a interset only loan?

    i.e Interest only loan of $100,000, 150,000, 200,000???

    thanks.

    Profile photo of scratchmescratchme
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    @scratchme
    Join Date: 2002
    Post Count: 56
    June 2, 2003 - 11:50 am

    Hi Avranjes,

    What you need is the yearly interest rate (call it i%), and the amont you want to borrow (call it X)

    Since there are 52 weeks in a year, your weekly repayments on an interest only loan is:

    weekly repayment = (X*i/100)/52

    so if your interest rate is 6.3% and the amount you borrow is $100,000 then your weekly repayments will be = (100,000*6.3/100)/52 = $121 (approx).

    APIM

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    Profile photo of NessieNessie
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    @nessie
    Join Date: 2001
    Post Count: 73
    June 2, 2003 - 11:51 am

    Hi avranjes

    It is a very simple process.

    Take the principal sum ie $100K X by the interest rate and then divide by 52 (weeks in a year)

    ie: 100K X 6% = 6000 per annum
    Divide this by 52 = $115.38 per week

    If you want to calculate P&I repayments you will need a financial calculator or use the Mortgage calculator on the realestate.com.au website

    Cheers
    Nessie

    Profile photo of avranjesavranjes
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    @avranjes
    Join Date: 2003
    Post Count: 58
    June 3, 2003 - 1:08 am

    thanks guys, i was looking at a potential +ve geared property and i hit a mental blank.

    Profile photo of hwd007hwd007
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    @hwd007
    Join Date: 2002
    Post Count: 247
    June 27, 2003 - 7:59 am

    How can this be right when interest is calculated daily ?

    I thought you had to take 6% or .06 then divide by 365 to get the daily rate result, add 1 to that, then multiply $100K by the result 31 times compounding each result, to get the monthly interest.

    Bearing in mind that 4 months only have 30 days, so you may need to deduct 4 days interest from that if you worked on a years interest then divided by 12 to get the mean average monthly interest.

    With the 31 day per month approach only, I get $510.84c per month in interest or $127.71 per week.

    With the 30 day months, I get $494.32 interest per month or $123.58 per week.

    Mean monthly interest = ( 510.84*8 ) 8 months interest + ( 494.32 * 4) for 4 months interest
    = $6064 in yearly interest.

    Thus mean monthly interest = $6064 / 12 = $505.33
    Thus mean weekly interest = $126.33

    Or are you saying that the banks just use the simple caculation when computing interest for a fixed interest only loan ? I’m not sure on that.

    [:O]

    Profile photo of birdmanbirdman
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    @birdman
    Join Date: 2002
    Post Count: 38
    June 27, 2003 - 12:10 pm

    It will also be slightly higher next year as it is a leap year (one extra day to take into account). You need to work off the daily rate that the bank uses.

    Profile photo of darrenbdarrenb
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    @darrenb
    Join Date: 2002
    Post Count: 71
    June 27, 2003 - 12:16 pm

    This is a formula I was given by a NAB personal banker 3 weeks ago for a loan I had.

    $84,000 * 6.56% pa /365 * 34 days = $513-30 per month

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