I'm working on a calculator and I have a good handle on Mortgages (amortization) and Credit Cards (daily average, apr, multiply between 3-5%), but I'm not sure how to calculate minimum payments for Loans. Is there a standard rule I can follow that will be "accurate enough" for most cases?

  • I know better than to use Simple Interest. – sean Aug 4 '12 at 20:53
  • If you know how to do Mortgages, then auto loans and education loans would be same, except for the tenor and rate of interest – Dheer Aug 5 '12 at 1:49

All Loans are the same. They have a initial amount, a number of payments and an interest rate. It doesn't matter what type of loan it is. Just use the amortization formula you used for the mortgages. There is only one calculated payment level.

Credit cards on the other hand have a minimum payment. The payment until recently was very low to generate income for a long time for the bank. The credit card company will also round up to $25 or $50 for small outstanding balances that would result in a very small minimum payments.

  • Thanks. I've been using $15 as my base amount, but I may increase that as it seems I've been utilizing outdated information. – sean Aug 7 '12 at 8:23
  • So, there are no laws determining what the minimum payments must at least be? – Geremia Dec 4 '14 at 2:59
  • The minimum payment for a loan is calculated from the agreed to interest rate, length of the loan, and amount of the loan. When dealing with a credit card, the minimum payment essentially indirectly sets the length of the loan. – mhoran_psprep Dec 4 '14 at 10:42

For a short enough term, say 5 years, 6% interest/yr. If the loan is $10,000, take the interest times the rate and half it. So we get 15%, times $10,000 or $11,500. Now divide by 60, for a payment of $191.66. This is pretty close to the actual payment needed of $193.32. This is off by less than 1%. I'd suggest using the same financial calculator to just get the number dead on. The car loan, student loan, etc are still loans, just like the mortgage, and the math is the same.

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