Loan Balance Calculator
When paying on a loan, your payment amount may not always match the payment amount specified in the original loan terms. In fact, you may choose to pay more than required. This calculator will help you determine the balance of a loan when payments have been different than the negotiated terms.
First enter the original principal amount borrowed, the annual interest rate, the original loan term in months, and a dollar amount for the original monthly payment. From the pull-down menus, choose a month and year for the first payment you made, and then indicate how many months have passed since the first payment. Click on “Create Loan Balance Calculator,” and a new calculator will appear below. You can then go in, month-by-month, and alter specific payments as you see fit. For each row, press FILL DOWN and new month-by-month balances will be generated.
How to Figure the Remaining Balance Due on a Loan
It's not always easy to determine the remaining balance on a loan. The easiest option is usually to use an online calculator, but even this requires a lot of information. Understanding all the elements that go into a loan will help you understand how you can figure out what's left.
Gathering Basic Information
The first two pieces of information that you need to calculate the balance on a loan are the principal amount borrowed and your monthly payments. For most loans, the payments are the same each month. Fixed rate mortgages operate this way. If, however, you have an adjustable rate mortgage, the payments will change over time. Calculating the balance for this type of loan is more difficult. You can't determine future balances since the rate will fluctuate over the life of the loan.
Calculating Your Interest Rate
Knowing the principal balance of your loan won't tell you how much you actually owe. For this, you need to understand the interest rate on the loan. Multiply the interest rate by the amount of the loan to see how much interest you're paying and add this to the balance to understand the total sum of the loan. If you take out a $1,000 loan with 10% interest, you're paying $100 in interest, making the total loan $1,1000.
If your loan has compound interest, you will need to calculate the interest rate for each year of the loan to determine the total interest for the life of the loan.
Amortization is something you will most often encounter with a mortgage or car loan. Amortization refers to the process of paying off a loan with a fixed repayment schedule in regular installments. Separate portions of each payment apply to the principal and interest. An increasing percentage of the loan goes toward the principal with each subsequent payment.
For example, if you took out a 5-year auto loan of $20,000 with a 6% interest rate, your first payment of $386.66 would put $286.66 toward the principal and $100 toward interest. Your last payment of the same amount would apply $384.73 to the principal and just $1.92 to the remaining interest.
Subtracting What You've Paid
It's important to know how many payments you've already made on a loan to accurately calculate what's left. To determine what you currently owe on a loan, you need to count how many payments you've made already. To determine what you will owe at a future point in time, you will add the appropriate number of months. If a year has passed, calculating for 12 months will tell you what you own now, but calculating for 24 months will tell you what will be left in another year's time.
With all this information in hand, use the following formula to calculate your balance:
B = L(1 + R)N – P [(1+R)N – 1/R]
- B = Remaining Balance
- L = Original loan amount
- P = Payment amount
- R = Interest rate per payment
- N = Number of payments
With the right information in hand, you can use pen and pencil or an online tool to get the numbers you need for your budget.