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How to calculate remaining loan balance

how to calculate remaining loan balance

How to Compute the Remaining Balance on a Loan

By JLP | June 14, 2006

Did you know that there is a formula that will tell you the remaining balance on a loan? There is and I am going to show you how to perform the calculation.

Let’s say you took out a $25,000/60 month (5 years) loan with a 7% interest rate to buy a car. Your monthly payment is $495.03. You have made 12 payments on the loan and you want to know what your loan balance is. To perform this calculation, you need to use this scary-looking formula:

Filling in the information that we have, the formula looks like this:

Did you get all that? If your answer was different from mine, it is due to rounding. However, your answer should be pretty close to the answer I got. So, this tells us that 12 months into the $25,000 loan, you still owe over $20,672.

If you didn’t understand this, don’t worry. I created The Remaining Loan Balance Calculator to help you out.

5 Responses to “How to Compute the Remaining Balance on a Loan”

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Steve Power Says:

I don’t know if it is appropriate to post a question in here. Please forgive me if this is a breach of etiquette, but I’m new to this and only discovered your blog this afternoon. I would be very grateful for a bit of advice.

I’m 44 and would like to retire at 65. The problem is that

I have student loans that total approximately $110,000 with an interest rate of 6.125% (the rate will go down to 5.125% in about two and a half years). I’m currently paying $740 per month and the loans should be paid off in about 28 years, more or less.

I am also currently putting $600 per month into various mutual funds which I planned to use to supplement my retirement benefits and social security benefits (if there are any).

Should I direct some of the money I’m putting into the mutual funds towards the principle of my studnet loan? I only make $64,000 per year so the $600 I’m investing is about all that I have left after paying living expenses.

Thank you for your consideration.


Melvyn Lim Says:

Hi, there’s actually a typo in the formula, although the example was computed correctly:

For brevity, let’s have

Category: Forex

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