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I have recently been attempting to create an amortization schedule program. I have failed multiple times at this point so I am starting back at square one, Payment Amount.

To begin calculating my payment let first get some information about the loan.

Payment Schedule: Monthly

Principal Amount: $25000.00

Annual Rate: 0.0385 / 3.85%

Term Length: 48

Term Unit: Months

Compounding Frequency: possible = [continuous, ..., Yearly]

Year Base: possible = [365/365, 30/360, 365/360]

I would like to be able to calculate the payment amount with or without a compounding frequency or year base being specified

Now I need to calculate the number of terms for a year along with the total number of terms.

Payment Schedule = Monthly -> Terms per Year = 12

Payment Schedule = Monthly & Term Unit = Months -> Total Terms = 48

Easy enough, now we need to calculate the Term Rate.

Term Rate = (Annual Rate / Year Terms) = (0.0385 / 12) = ~0.00320833333

Because this is a program I will not be rounding any of my answers until they are ready to be displayed.

Now we should be ready to calculate payment. Below is the formula to calculate the payment without compounding interest

Payment = (Term Rate * Principal) / (1 - [(1 + Term Rate)^(-Total Terms)])

For my values my payment comes out to: $562.80

When I have checked this using other payment calculators it seems to be correct. What I am wanting to know is if I am calculating it correctly and if not, how should I be calculating it? Also, I am needing to know how to calculate my payment with compounding freq. given.

EDIT

I will need to use a different formula IF there is compounding interest. I need to know this formula.

FamousAv8er
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  • Compounding frequency is used for when there's compound interest. You should probably clearly state your problem (ie, how your loan works) and what you want to know. – Fimpellizzeri Feb 06 '20 at 18:54
  • @Fimpellizieri I am hoping to be able to calculate a payment with or without a compounding freq. given. If one is given I will use a separate formula. These frequencies ideally could be continuous all the way up to yearly. – FamousAv8er Feb 06 '20 at 18:57
  • @Fimpellizieri I see now I will need a separate formula. Looking for that now. – FamousAv8er Feb 06 '20 at 19:02
  • Yes, but how does your payment work? There seem to be a lot of parameters in your question, but perhaps it would be best to clarify them and how they interact with your payment schedule. – Fimpellizzeri Feb 06 '20 at 19:04
  • @Fimpellizieri I assumed all of the parameters I provided were necessary to calculate the payment. I was going to save the other steps in the schedule for another question once I figured out how i needed to be calculating my payments. I will try and clarify what I need. – FamousAv8er Feb 06 '20 at 19:06
  • @Fimpellizieri it seems for now all I require is the formula to calculate the payment when given a compounding frequency. – FamousAv8er Feb 06 '20 at 19:13
  • I cannot help you unless you better specify how it works. It is fairly straight forward to calculate how much will be paid in total at the end, but I'm not sure how your payments work. – Fimpellizzeri Feb 06 '20 at 19:19
  • @Fimpellizieri sorry, to clarify the payment will be the minimum amount that must be paid for each payment term. So this payment will be calculated once for the life of the loan (excluding final payment) and be used for each payment. By the end of the amortization there should be no remaining principle and no remaining interest. If the final balance (Principal + Interest) is less than the payment, the payment becomes the remaining balance. I hope this makes what I need a bit more clear. – FamousAv8er Feb 06 '20 at 19:22
  • @Fimpellizieri for some of the calculators online Im using to compare against, their payment seems to remain the same even on the final payment. If possible, that would be ideal. – FamousAv8er Feb 06 '20 at 19:34

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