If additional fees and interest are levied after the initial two week period, this interest rate can skyrocket even higher. How do you calculate the monthly loan payment Monthly loan payment is calculated by dividing the total amount payable (which includes interest) by the number. This is a rate of 5 percent for the two weeks, but once those two weeks are multiplied by 26 (the number of two-week periods in a year), the simple interest is shown to be 130 percent-a very expensive loan. For example, a payday loan store may charge $50 for a $1,000 loan, due in two weeks' time. This shows that the APR of this loan is 26.2 percent, but after compounding, it results in total paid interest of 30 percent.ĭetermine the cost of a short-term loan by expanding it over the course of a year. This can be compared with the daily interest rate on a credit card statement, or multiplied by 365 to compare it to the credit card's Annual Percentage Rate (APR). This yields the following algebraic formula, where X is the daily interest rate: To use an interest calculator, enter the loan amount you want to avail. First, determine the number of compounding periods over the lifetime of the loan in the example, this is 365 (days in a year). Using the Bajaj Finserv Interest Calculator is easy. To compare this with a credit card, we must determine the compound interest rate. For example, we have determined that $300 on a $1,000 loan is 30 percent in simple interest. As the interest rate is charged against the total balance each period, the formula is (1 + Interest Rate)^Periods. Calculate the compound interest rate, in which you are paying interest on both the amount of the loan and the interest accrued, by using exponentials.
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