Posted by ReneeK/MI on March 26, 2009, 12:34 pm, in reply to "Different methods for different lenders"
68.43.29.109
be the Amount Financed? Using the original loan amount would only give you the actual interest rate, not the APR.
HA - for Craig, I need a little more thinking/time! LOVE IT! =)
--Previous Message--
: There are 4 methods and formulae used by
: lenders to calculate your APR:
: * Actuarial method
: * Constant-ratio method
: * N-ratio method
: * Direct-ratio method
:
: The actuarial method and formula for
: annual percentage rate (APR) are the
: most widely used by lenders to
: calculate APR. Detailed formulae,
: examples and explanations for
: borrowers of the actuarial method are
: provided in Regulation Z in the
: Consumer Credit Protection Act.
:
: Using Excel to calculate the APR:
:
: Step 1:
: Enter the number of periods you will
: be borrowing the money in cell A1 of
: your Excel spreadsheet. For this
: example, enter 360, which will be the
: number of periods in a house note. In
: this instance, 360 periods is 360
: months (30 years * 12 months/year).
: Excel's abbreviation for this part of
: the formula is nper (number of
: periods).
:
: Step 2:
: Enter the amount that will be paid in
: a month. The house note costs
: $1,600/month. Enter
: "-$1,600" in cell A2. This
: is the amount of the monthly note.
: Each month removes $1,600 from the
: payment owed. Excel's abbreviation for
: this is pmt (payment).
:
: Step 3:
: Enter the amount owed in cell A3. The
: amount owed in this example is
: $250,000, which is the original value
: of the loan amount. Enter $250,000
: without the dollar sign and the comma.
: Excel's abbreviation for this part of
: the formula is pv (present value).
: Present value is the total amount that
: a series of future payments is worth
: now. It is the amount of money that is
: being financed.
:
: Step 4:
: Type "0" in cell A4. This is
: because at the end of the loan the
: desired balance is zero. The goal is
: to pay off the home loan. For Excel,
: this part of the formula is fv
: (future value). The future value is
: the balance that is desired after the
: payments are made.
:
: Step 5:
: Type " =Rate(A1,A2,A3,A4)*12
: " in cell A5. The resulting rate
: is 7%. This means that the annual
: percentage rate (APR) is 7% for a
: $250,000 house for which the payment
: is $1,600/month. The formula is
: multiplied by 12 in order to get the
: Annual Percentage Rate. If 12 were
: excluded, the rate returned would be
: the monthly APR.
:
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:
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: the author
: and may not reflect the opinion of the
: management nor of any other user of
: this forum.
:
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: practice law in the State of Florida,
: and I may not give legal advice or
: accept fees for legal advice.
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