How to calculate the principal of equal amounts of principal?
Among the loan repayment methods,Equal amount of principalIt is a common repayment method, and its characteristic is that the monthly repayment amount decreases month by month. This article will analyze in detail the principal calculation method of equal principal, and attach a structured data table to help readers better understand.
1. Basic concepts of equal principal amounts
Equal principal payments mean that the lender repays the same amount of principal each month and also pays the interest accrued on the remaining loan during that month. Since the monthly principal is fixed and the interest decreases each month, the total monthly repayment will also gradually decrease.
2. Principal calculation formula for equal amounts of principal
The principal calculation for equal principal payments is relatively simple. The monthly principal repayment amount is fixed. The formula is as follows:
Monthly principal repayment = total loan amount ÷ number of repayment months
For example, if the total loan amount is 1 million yuan and the repayment period is 20 years (240 months), the monthly principal repayment is:
| total loan amount | Number of repayment months | Monthly principal repayment |
|---|---|---|
| 1 million yuan | 240 months | 4166.67 yuan |
3. Calculation of interest on equal amounts of principal
The formula for calculating monthly interest is:
Monthly interest = remaining loan principal × monthly interest rate
Assuming that the annual interest rate of the loan is 5%, the monthly interest rate is 0.004167 (5% ÷ 12). Here is a specific calculation example:
| Number of repayment periods | Remaining loan principal | monthly interest rate | monthly interest |
|---|---|---|---|
| 1st month | 1 million yuan | 0.004167 | 4166.67 yuan |
| month 2 | 995,833.33 yuan | 0.004167 | 4150.69 yuan |
| 3rd month | 991,666.66 yuan | 0.004167 | 4134.72 yuan |
4. Total monthly repayment of equal principal amount
The total monthly repayment consists of a fixed principal and decreasing interest each month, based on the formula:
Total monthly repayment = monthly principal repayment + monthly interest
Here is an example of total repayments for the first three months:
| Number of repayment periods | Monthly principal repayment | monthly interest | Total monthly repayment |
|---|---|---|---|
| 1st month | 4166.67 yuan | 4166.67 yuan | 8333.34 yuan |
| month 2 | 4166.67 yuan | 4150.69 yuan | 8317.36 yuan |
| 3rd month | 4166.67 yuan | 4134.72 yuan | 8301.39 yuan |
5. Advantages and disadvantages of equal principal amounts
advantage:
1. The total interest expense is less because the monthly principal repayment is fixed and the interest decreases month by month.
2. Suitable for borrowers with higher income who want to reduce interest expenses.
shortcoming:
1. The early repayment pressure is high and the monthly repayment amount is high.
2. Not suitable for borrowers with unstable income.
6. The difference between equal principal and equal principal and interest
Equal amounts of principal and equal amounts of principal and interest are two common repayment methods. The main differences are as follows:
| Comparative item | Equal amount of principal | Equal principal and interest |
|---|---|---|
| monthly repayment amount | Decreasing month by month | fixed |
| total interest expense | less | More |
| Early repayment pressure | Larger | smaller |
7. How to choose the repayment method?
Choosing equal amounts of principal or equal amounts of principal and interest depends on your personal financial situation and repayment ability:
1. If your income is high and stable and you want to save interest, you can choose an equal amount of principal.
2. If your income is low or unstable and you want to have less pressure on early repayments, you can choose equal principal and interest payments.
8. Summary
The principal calculation of the equal principal amount is simple and straightforward, with a fixed principal repayment every month and interest decreasing month by month. Although the upfront repayment pressure is greater, the total interest expense is less. Borrowers should choose the appropriate repayment method based on their own circumstances.
check the details
check the details
en
