Q: On a $1000 loan at 20% interest, why is my interest not $200 for one year?
A: This is a common question that we often get and some information is missing to answer the question so we’ll analyse this, taking into account various scenarios and how to manage this in Margill Loan Manager.
There is a misunderstanding as to the concept of “amortization”.
- Desired Interest per payment: 200 / 26 = 7.69
- Principal per payment: 1000 / 26 = 38.46
- So 26 payments of 46.15 each (26 x 46.15 = 1199.90)