Total Loan Cost Formula

This is the formula to use if you want to determine the total amount you will pay for a loan.

If we borrow $100,000 for 10 years at 8 per cent annual percentage rate, what is the total cost of the loan (principal plus interest) ?

1) The rate would be 8 divided by 1,200
      which equals .0066666666...
2) The months would be 12 × 10 = 120.
3) So the total cost of the loan would be:

.0066666666   ×   $100,000     ×   120
           1 - (1 + .0066666666) -120       

Which equals:

[ .0066666666   ×   $100,000     × 120 ]   ÷   [ 1 - (1 + .0066666666) -120 ]     =

[ 80,000 ]   ÷   [ 1 - (0.45052346071062) ]     =

80,000   ÷   0.54947653928939   =  

$145,593.11


Aren't you glad you have the Loan Calculator to use instead of this method?

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