Did you know that there is a formula that will tell you the remaining balance on a loan? There is and I am going to show you how to perform the calculation.
Let’s say you took out a $25,000/60 month (5 years) loan with a 7% interest rate to buy a car. Your monthly payment is $495.03. You have made 12 payments on the loan and you want to know what your loan balance is. To perform this calculation, you need to use this scary-looking formula:
Filling in the information that we have, the formula looks like this:
Did you get all that? If your answer was different from mine, it is due to rounding. However, your answer should be pretty close to the answer I got. So, this tells us that 12 months into the $25,000 loan, you still owe over $20,672.
If you didn’t understand this, don’t worry. I created The Remaining Loan Balance Calculator to help you out.