Forum Discussion
I need a formula to calculate a loan payment with additional principle added to accelerate payoff...
Douglas997t wrote: ``The additional payment made each month is to be applied directly to principle as opposed to as a prepayment applied to both principle & interest.``
Ostensibly, the Excel formula is: =NPER(D66/12, D68 + D69, -D64)
But that results in 200.466253023484, which rounds to 200.47, not 200.48.
And IMHO, NPER should be rounded up because humans cannot count non-integer periods.
So the formula should be: =ROUNDUP(NPER(D66/12, D68 + D69, -D64), 0)
Mathematically, the amount of periodic interest is always prevBal*intRate. It is not affected by the amount of the payment.
So, any additional payment does indeed reduce only principal.
However, as principal is reduced periodically, so is the amount of interest each period.
This is demonstrated below. See the attached Excel file for formulas.
No need to apologise, I am perfectly happy to take positive suggestions or even criticism on board. I freely admit that I had not taken rounding into account, both because the rules to be implemented had not been specified and because I didn't want to add complexity to what is already a somewhat alien approach to spreadsheet usage.
Your background as a compiler writer did come as a little bit of a surprise, my background was scientific programming using Fortran IV, so not as fundamental in IT terms. My point in describing the approach as 'closer to the world of professional programmer' was not as a comment of professionalism but a recognition of the task as a programming exercise rather than merely the manipulation of numbers that tends to characterise normal spreadsheet use.
The formulas I had in mind were those that underpin the PMT function that, itself, generates an unrounded value. Rounding it up generates an over-payment which accumulates but I could adjust the calculation within the final payment period to compensate. I think that will happen automatically but I will check.
Something I aim to achieve, is to create a formula that can be modified to give results for variable interest rates or periods of grace etc, without touching the spreadsheet itself, other than creating a lookup table to show the changes against the period for which they scheduled. I certainly do not prioritise 'concise'; in general I am for 'readability' and avoid direct cell referencing despite it being the industry standard for spreadsheets.
This workbook shows the base payment rounded up and the interest charged rounded down to the nearest dollar. The final period adjustments are pretty large but I assume that is normal.
