# Calculating interest only - Posted by LeAnne - WA

Posted by Dan - GA on July 14, 2003 at 21:37:03:

Matt:
Both of your examles are simple interest calculations. One with 12 fixed periods/year, the other with 12 variable periods/year. Compound interest “adds” interest daily (or whatever the comouding period is) and calculates the next periods interest using the new higher priciple balance.

Day 1 \$100,000.00000 x .06/365=16.43835
Day 2 \$100,016.43835 x .06/365=16.44111
Day 3 \$100,032.87941 x .06/365=16.44376
etc… etc… etc…

The interest is rising about .003 per day. In a 30 day month, the last day will have about 10 cents more interest charged per day, or an average of 5 cents per day, \$1.50 per month. So instead of 100,000x.06/365x30= \$493.15, the interest paid or charged is \$494.65 or an effective yeild of 494.65/30x365/100000=6.018%. The .018 is the value of compounding.

Calculating interest only - Posted by LeAnne - WA

Posted by LeAnne - WA on July 13, 2003 at 11:48:13:

Hello.
Can someone tell me how to calculate interest only payments? Just use ficticious numbers.

Re: Calculating interest only - Posted by matt johnson

Posted by matt johnson on July 14, 2003 at 10:48:14:

it depends whether the loan is simple interest or compunded daily.
if simple interest = loan amount X interest rate / 12 = monthly payment.
compunded daily = loan amount X intersest rate / 365 X days in given month = given months payment

Thanks, guys! That was so easy… - Posted by LeAnne - WA

Posted by LeAnne - WA on July 13, 2003 at 13:28:58:

I feel kinda stupid now!

Re: Calculating interest only - Posted by James Strange

Posted by James Strange on July 13, 2003 at 13:24:52:

Loan Amount
\$100,000

Rate:
5.500%

Step 1: Calculate Total Annual Interest

Your total annual interest would be \$100,000 (Loan Amount) X .055 (Interest rate in Decimals)

= \$5,500 Annual Interest Owed

Step 2: Calculate Total Monthly Payment

Divide the annual interest by 12 (number of months in a year) to determine your monthly payment.

\$5,500 (Annual Interest) divided by 12 (number of months)

Monthly Payment of 458.333333

Re: Calculating interest only - Posted by Dwayne

Posted by Dwayne on July 13, 2003 at 13:19:19:

It’s calculated as follows: Assume loan amount of \$100,000.00 and interest only rate of 5%. \$100,000.00 X 0.05 = \$5,000.00 annual interest. Divide \$5,000.00 by 12 months and monthly interest only payment is \$416.67.