20
Lending
Loan With a Constant Amount Paid Towards
Principal
This type of loan is structured such that the principal is repaid in equal
installments with the interest paid in addition. Therefor each periodic
payment has a constant amount applied toward the principle and a
varying amount of interest.
Loan Reduction Schedule
If the constant periodic payment to principal, annual interest rate, and loan
amount are known, the total payment, interest portion of each payment,
and remaining balance after each successive payment may be calculated
as follows:
1. Key in the constant periodic payment to principal and press 0.
2. Key in periodic interest rate and press .
3. Key in the loan amount. If you wish to skip to another time period, press
. Then key in the number of payments to be skipped, and press
0 .
4. Press to obtain the interest portion of the payment.
5. Press 0 to obtain the total payment.
6. Press 0 to obtain the remaining balance of the loan.
7. Return to step 4 for each successive payment.
Example 1: A $60,000 land loan at 10% interest calls for equal semi-
annual principal payments over a 6-year maturity. What is the loan
reduction schedule for the first year? (Constant payment to principal is
$5000 semi-annually). What is the fourth year's schedule (skip 4
payments)?
Keystrokes Display
5000 0
10 2
5.00 Semi-annual interest rate.
60000
3,000.00 First payment's interest.
0
8,000.00 Total first payment.
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