Loan Payment Calculator

Calculating Monthly Payments and Looking at the Effect of Extra Payments

Brandon

November 23, 2014

What is it?

  • A monthly payment calculator for loans
  • A means to see how much you'll pay in interest over the course of your loan
  • A visual tool to illustrate the importance of making extra payments on your loan

What does it specifically do?

  • Enter you loan information
    • Principle
    • Interest rate (APR)
    • Length of loan (years)
  • Hit "Calculate"
  • Get back relevant information
    • Monthly loan payment
    • Total interest paid over the course of the loan
    • A plot showing how making extra payments reduces the time you pay on the loan

Why is it necessary?

  • Help consumers make more informed financial decisions
  • Easily illustrate the effects of making extra payments on your loan
  • Determine estimated monthly payments on your loan

How does it do it?

  • Use a finacial formula to calculate the estimated monthly payment.
  • Calculate the number of payments made over the course of the loan.
  • Subtract the principle from the total amount paid to get the total interest paid.
  • Calculate the time taken to pay off the loan when making various extra payments.
  • Plot the time taken to pay off the loan vs. the extra payment.

A sample of the code

Calculate the monthly payment:

P <- 60000; r <- 6.5; n <- 10
payment <- format(round((r/(12*100)*P)/(1-(1+r/(12*100))^(-n*12)),2), nsmall=2)
print(paste("Your monthly payments will be $", payment, ".", sep=""))

## [1] "Your monthly payments will be $681.29."

Calculate the total interest paid over the course of the loan:

P <- 60000; r <- 6.5; n <- 10
payment <- round((r/(12*100)*P)/(1-(1+r/(12*100))^(-n*12)),2)
totalInterestPaid <- format(round(payment*(n*12)-P,2), nsmall=2)
print(paste("If you make the normal payments (i.e. you pay no extra), the total interest paid on the loan will be $", totalInterestPaid, ".", sep=""))

## [1] "If you make the normal payments (i.e. you pay no extra), the total interest paid on the loan will be $21754.80."

Where do we go from here?

  • Get more publicity for the app
  • Use this as a jumping off point for a discussion of financial literacy