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An Example
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| This short example is showing
the time required to pay off the debt under fixed monthly payment. |
| Principal Loan Amount
(P) |
$2000 |
| Interest Rate (I) |
12% |
| Monthly Interest Rate
(r) |
R/100*12=0.01 |
| Interest paid in First
Month ( P * r ) |
$2000*0.01= $20 |
| Monthly Payment ( M ) |
$400 |
| Principal Loan Amount Adjusted
( L = M - P * r ) |
$400-$20 = $380 |
Therefore, Principal Loan Amount outstanding at the end of First month
= ( P-L )
= $( 2000-380 )
= $1620
In the same way monthly payment will be amortized between Principal Loan
Amount and Interest .
It will take 6 months to pay off the
total debt under existing situation.
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