Learn how to calculate Actuarial Method Loan - Tutorial
Learn how to calculate Actuarial Method Loan - Definition, Formula and Example
Allotting the payments made on a loan between the borrowed principal amount's balance and also the interest due on a loan obligation, under which a payment is done initially to the accrued interest is termed as the actuarial method.
u = unearned interest
p = monthly payment
n = number of remaining monthly payments
V = the value from the APR table that corresponds to the annual percentage of loan rate for the number of remaining payments
Consider that a person need to pay a monthly due of Rs 5000 for the period of 12 months. He had done the payment only for three months and the unpaid amount for the term is nine months. How to compute the annual percentage rate for the unearned term periods?
n= 12 months, p = 5000 u = 9 months
Annual Percentage Rate
Substitute the values in the formula,
9 = (12 * 5000 * V) / (100 + V)
9(100 + V) = 12*5000*V
900 + 900V = 60000V
59100V = 900
V = 900 / 59100
V = 0.015 %
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