So, given a starting principle, interest rate, and number of payments, how do you calculate the payment you need to send in each month with "your" formula?
On Wednesday, Jul 2, 2003, at 21:56 US/Central, Matthew Vanecek wrote:
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On Wed, 2003-07-02 at 07:52, Perry Smith wrote:The world of finance is often not logical.
With car loans, often the "rule of 77's" is used to determine interest.
This is based upon a sum of digits formula. It basically causes more
interest to be paid off earlier than later. Not all car loans do this.
I've noticed a recent trend not to use this method but use a more
standard method. The only time this really matters is when you want to
pay off your car loan early and then you are hit with a surprise.
Don't you mean "rule of 78s"? I've never heard of an auto loan that is
set up that way. Mine certainly isn't. I had a choice of two, and both
were simple interest. My last auto loan was simple interest, and I
payed that one off early--the outstanding principal only. If car
dealers where you are are setting up those types of loans, you're
getting seriously screwed. Almost *nobody* except the odd high-interest
personal loan shop uses the "rule of 7whatever" anymore, and especially
not in my part of the country.
This brings up the question of paying extra each month. You need to
look at your note and see what happens. As far as gnucash, there needs
to be a way to enter a generalize formula for such events. Loans, done
complete and "right" are really really hard. Quicken and Quickbooks
fail at this but it seems "doable" to me.
If you *are* stuck with paying on a "rule of 78s" loan, paying extra won't matter. Key words to look for are "rebates if payed off early", etc. However, for an auto or mortgage, I highly doubt you can find anything other than a simple interest loan.
Getting the monthly payment to match a bank's idea of the payment is
often hard and wierd. One way to do it that may work is fudge the
original principle up or down to make the monthly payment come out
right. You can consider whatever amount you need to add in to make
the monthly payment come out right as "points" or interest paid up
front. Any amount you subtract out you would consider principle paid
up front. Often the last payment is not the same as the monthly
payments as well. This can be handled with a one time entry in the
same way. This basic technique usually works for me in the
Quicken/Quickbooks style calculators and it accurately represents where
the money went to.
You got some weird banks. I can calculate to the ha'penny what's interest and what's principal in each month's payment. All you have to know is the compounding period (e.g., 5%/12, or 5%/360, or 5%/365, etc.).
I *do* kindof wish my formula below (which is the same as the bank's formula) were part of Gnucash, instead of that pmt() function, or in addition to. Put it in there as a simple interest calculation method, and allow for extra payments. I ain't got time to code it myself, so I'll be happy with my spreadsheet, but anyone else is free to contribute, too...
On Tuesday, Jul 1, 2003, at 22:01 US/Central, Matthew Vanecek wrote:--
On Tue, 2003-07-01 at 20:43, Josh Sled wrote:On Tue, Jul 01, 2003 at 07:59:40PM -0400, Daniel Hannum wrote:
| I have a number of questions about the mortgage/loan repayment druid. | BTW, I'm on 1.8.1 (redhat 9). So I this has been fixed, please let me | know. I'm not prepared to grapple with upgrading (yet)... it was easier | under Debian......
I don't believe the Mortgage/Loan druid has seen any changes since 1.8.0.
| Now, when I put the principal, rate and term into Gnucash's druid, it | comes up with 374.13, but that's not good, because that's not what I'm | actually going to pay.
4 whole cents off? Good enough for government work... ;)
Perhaps, but not for personal finance. I resorted to an Open Office spreadsheet, and enter interest/principal from there.
If it's a constant 0.04, you could modify the formulae to add/subtract that out, but that's a nasty hack. OTOH, it might solve your immediate problem, though I imagine that the rest of the calculations would be off, as well. :(
I had expected that the calculation would vary from most people's actual payments for various reasons ... this is a good example of this. Sorry.
| 1. How do I force a particular loan payment? On the page of the
Druid
| where you specify the 'Amount' and the accounts where the principal
and
| interest will be, I tried replacing the "pmt()" expression with
$374.09,
| but it seemed to ignore me; the next page still had 60 payments of
$374.13
Hmm... that should actually work, IIRC.
In playing with it, it does look like any changes made to the Payment
field are ignored, which is quite unfortunate. Filing a bug at
bugzilla.gnome.org is appreciated.
| 2. What does "pmt( 0.07900 / 12 : 60 : 18495.00 : 0 : 0 )" mean? | Obviously, it's rate, term, principal, but what are the last 2 zeroes? | Perhaps I shouldn't care. Or perhaps it could help to know.
This one can be answered by looking in src/scm/fin.scm [I forget where
it's copied on install, but `locate fin.scm` should find it] -- the
last
two terms are the "future value" and "type", as defined by the
Gnumeric
1.0.8 functions of the same name. Future value could be non-zero, but
I made the simplifying that it is.
I was hoping to have a more name=value function syntax in the future,
but
time's a bitch.
| 3. If I were to start paying the loan off faster, with irregular
| amounts, I would have to put these transactions in by hand. Does it
seem
| correct to take the balance after the previous payment, multiply it
by
| 7.9%/12 and use that as the interest portion? I would think that
would
| be right, but when I try that with the current balance, it doesn't
come
| up the same as what the scheduled transaction generator is
producing...
| so you guys must have a different algorithm.
Yes ... there's an existing bug [and some design-time requests which
were
not incorporated] that any future transactions should be based on the
present value of the account at the time of payment... this would be a
nice expansion of the feature. :(
| Any help would be appreciated.
I fear that wasn't a lot of help, unfortunately, but hopefully it's
more clear. My time to enhance this [or any] part of the codebase is
non-existant at present, a situation I don't think will be resolved
for
some number of months. Hopefully someone will step up to this.
My auto loan is simple interest. Here's how the payment breakdown works out. Suppose an interest rate of 5%:
bal = initial/running principal balance prin = principal portion of payment int = interest portion of payment days = payment date - last payment date amt = amount of payment
int = (days * (5%/365)) * bal prin = amt - int bal = bal - prin
This formula matches my bank's numbers perfectly, so I'm pretty happy
with it. Unfortunately, I couldn't get Gnucash to do the same thing,
so
I just transfer the numbers from the spreadsheet. Using the
spreadsheet
also allows me to insert rows for extra payments. I tried all the PMT
and INT and FPV and NPV formulas--they all seemed to be a few pennies
off at the closest. So I just use my own. *shrug*worksforme. YMMV,
etc., etc.
-- Matthew Vanecek
perl -e 'print
$i=pack(c5,(41*2),sqrt(7056),(unpack(c,H)-2),oct(115),10);'
********************************************************************* **
*********
For 93 million miles, there is nothing between the sun and my shadow
except me.
I'm always getting in the way of something...
_______________________________________________ gnucash-devel mailing list [EMAIL PROTECTED] http://www.gnucash.org/cgi-bin/mailman/listinfo/gnucash-devel
Matthew Vanecek
perl -e 'print $i=pack(c5,(41*2),sqrt(7056),(unpack(c,H)-2),oct(115),10);'
*********************************************************************** *********
For 93 million miles, there is nothing between the sun and my shadow except me.
I'm always getting in the way of something...
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