Loan Amortization Using Present Value of Annuity Formula

[@FeraldiMarco]

super! it took me over 15 videos to find this answer and you nailed it! thanks.... I was looking for the table you created to understand how interest and C were linked together. very well done, thanks

[@olivermathiasen3594]

Man i have been struggle with this subject for so long. This video really helped me. Im 16 atm, and dont have chance for school atm. So im self studying and now i can finaly understand this subject. Thank you thank you thank you. Thank you so much. This means everything to me.

[@professorikram]

Kudos to you for self learning. If you feel stuck, reach out. Will try my best to help you.

[@Rahul_Prajapati-n9n]

Thank you so much for this immensely useful information, sir. Hoping for more of these kind of videos in the future🤞🤞Love from India❣❣

[@professorikram]

So nice of you! Thank you.

[@hadirizmeen140]

Ado machan thank you bn

[@nakazzihadijjah1465]

Wow, so helpful, Detailed, got more than I needed, thanks

[@ver0nica1982]

You are a wonderful teacher.

[@fsocietyyyyy]

you are a wonderful liar

[@SamarthPandya]

Very well explained.I like the explanation

[@kaichuanyu5964]

sir, you are a legend!

[@levmade]

this explanation is way way better than what we had at our university lecture, thank you so much!

[@mannasehmbunji9921]

This is so helpful

[@miyazaki2542]

sir i have a question, if it said beginning of each year, would the chart be same? or the interest be zero in the first year of installment?

[@professorikram]

Hello Miyazaki. If the payment is at the beginning of the year, then divide your answer by (1+r), where r is the interest rate. So, in the example above, you would do ($2,504.56/1.08) = $2,319.04. You will notice that the yearly payment is lower. That's because the first payment you make towards the loan is immediate and hence you don't accrue interest. Hope this helps!

[@miyazaki2542]

@@professorikram thank you so much, sir, i was having a hard time understanding the loan amortization schedule, your video and explanation helped me learning it, thank you for replying to my question.

[@nambulaharriet7559]

Are we not supposed to divideth e interest by 12 months since it is saying annually

[@aryaman4068]

This video is gold

[@professorikram]

Thank you Saksham! Also, I have recently created a website called SimpliTaught (www.SimpliTaught.com). It's in beta mode right now, but check it out. There, you can find curated content for your college textbooks. Would welcome any feedback.

[@josemastery955]

Expert🙌🙌

[@oxgn.]

How to solve the last part 10000=c(1-1/(1.08)^5/.08

[@ounoudmohamadhamie7872]

best of the best

[@potatoe8955]

what if the repayment is monthly?

[@Simran-oi4fi]

Divide interest rate with 12 then

[@Chumpwomp03]

​@Simran-oi4fi so instead of the rate 0.08 it would be 1.5? (Help i don't understand)

[@Chumpwomp03]

​@@Simran-oi4fi hopeee u coulddd responddd😭

[@professorikram]

@p.sahrasantiago751 could you tell me a little bit about how you got 1.5?

[@Chumpwomp03]

@professorikram Hello, I divided 12 to 8, that's why i got 1.5. (Pls enlighten me! 🙇‍♀️🙇‍♀️)

[@balochkareem4931]

Thank you Sir.

[@sashikaudaini3477]

thank you sir

[@professorikram]

Thank you Sashika! Also, I have recently created a website called SimpliTaught (www.SimpliTaught.com). It's in beta mode right now, but check it out. There, you can find curated content for your college textbooks. Would welcome any feedback.

[@jandogroniloa.881]

@@professorikram good day sir, what "t" Means for?, is it the number of payments to the given years? In my module is compounded quarterly for 3 years so the t=12?

[@sidramasooma6941]

Saviour 💯❤️

[@amyhuang3974]

what if i have 3 annuities instead of once per year?

[@Eliza-sm2en]

thank you

[@essarbhatt585]

How to calculate cost to buy down interest

[@professorikram]

Hi Essar - I am not sure I fully understand your question. Can you rephrase?

[@465marko]

If the bank asked me for a constant payment of "C", I think I'd get to the first one and be like "I'm broke, See?!?!"

[@professorikram]

😀

[@ArijitMukhopadhyay]

Awesome!

[@fancypants5730]

I have no idea how he comes up with a loan of 10000 for 5 years at 8% to make the first payment of 2500???

[@trident1409]

watch the video carefully and beforehand know what is annuity.

[@kermit9987]

I get what you’re saying. It’s just the banks/lenders method for how you make payments. It’s not straight across the board. It’s amortization. The payments seem to be averaged with the total principal and total interest to be paid divided among the term. It makes payments less of a burden in the beginning from what you were expecting, but it keeps the same consistent burden throughout the life of the loan, as long as you’re only making the minimum payments. You probably thought the first payment should be $2,800. And, it would be without the banks method. But, this would increase the amounts to be paid earlier on with the loan. However, as payments are made, the payments will also be reduced because the payments aren’t averaged and redistributed evenly over the 5 years, which would lower the payments and lessen the burden in the long run. Also, by using the banks method, you will end up with less equity in the beginning since the interest stays high while the principal payment is less than $2,000. Usually, lenders/banks use amortization to make sure they get paid on the interest quicker. So, if you paid the minimum payments exactly how the bank structured your payments and you decided to sell 10 years down the road on a 30yr fixed mortgage, you would have less equity in your house for example. They do this because their money is in the interest. When you go to sell your house, the proceeds are yours, generally.

[@Sky-pg6xy]

Just draw the whole line and then dash it :....0