Loan calc adfition principal3/16/2023 ![]() ![]() As such, the borrower should be cognizant of the fact that the money that goes into the payment of EMI doesn’t actually reduce the principal entirely because a portion of it pays off the interest charged. In today’s financial setup, most of the bank loan repayment is characterized by EMI that includes both the interest payment and the principal repayment. Outstanding principal calculation after first payment = Loan amount – Principal repaidįrom the point of view of a borrower, it is very important to understand the underlying concept of principal because, during the life of the loan, the interest is charged based on the outstanding principal amount. Determine the outstanding principal for the accountant after the first payment. The CEO of the company asked the accountant to calculate the outstanding loan principal amount after the first monthly payment of $8,864.12 is made. The company took a 2-year loan of $200,000 last month to fund its ongoing expansion plans. Ltd which is a gym facility located in the city of California. Let us take the example of company ABC Co. Interest payment = Opening loan amount * Rate of interest /12 Principal repayment = EMI – Interest payment Outstanding principal = Opening loan amount – Principal repayment which can be further expanded as below, Outstanding principal = Opening loan amount – (EMI – Interest payment) Outstanding principal = Opening loan amount + Interest payment – EMI Now, the interest payment for the month can be calculated by multiplying the rate of interest with the opening loan amount and then dividing the result by 12 (since r is the annualized interest rate), as shown below.Next, the rate of interest to be charged on loan during the period (say annually) has to be figured out. ![]() Firstly, the opening loan amount has to be determined. ![]()
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