A loan is repaid with equal monthly installments over a period of 20 years. The interest rate is 10.25% per annum, compounded monthly.

1. Calculate the deposit amount.
2. Calculate the loan amount.
3. Calculate the monthly installment.
4. Calculate the outstanding balance after the 129th payment.
5. Due to financial problems, John was unable to pay the 130th installment.

Question

A loan is repaid with equal monthly installments over a period of 20 years. The interest rate is 10.25% per annum, compounded monthly. 
 
1. Calculate the deposit amount. 
2. Calculate the loan amount. 
3. Calculate the monthly installment. 
4. Calculate the outstanding balance after the 129th payment. 
5. Due to financial problems, John was unable to pay the 130th installment.

GinnyAnswer · Answer

(1) Deposit amount: Cannot be determined without more information. (2) Loan amount: Assuming $100 , 000 for demonstration. (3) Monthly installment: $981.64 ​ (4) Outstanding balance after 129 payments: $70 , 215.17 ​ (5) New balance after missed 130th payment: $70 , 814.90 .

Examples 
 Understanding loan repayments is crucial in personal finance. For instance, when buying a car or a house, you often take out a loan. Calculating monthly installments, outstanding balances, and the impact of missed payments helps you manage your finances effectively. Knowing these calculations allows you to make informed decisions about borrowing and repayment strategies, ensuring you can meet your financial obligations and avoid potential penalties.

Answer (1)

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