I'm having a little trouble figuring this out. Suppose I took out a loan with the following terms:
Loan Amount: 1,000
Interest Rate (APR): 10%
Compound Frequency: Monthly (12 compounding periods)
Number of Payments: 12
Number of Years: 1.0
Compound loan total: 1,104.71
Monthly Payment: 87.92
Expected Loan Cost (monthly payment * num payments): 87.92*12 = 1,055.04
Plugging in the above numbers in an online payment calculator results in the same monthly payment of $87.92, so now I'm confused: why is the final amount different?
I tried another compound interest calculator online and I got the same result: $1,055.04
The compound loan total seems correct: if I'm getting charged 10% per year, at the end of a 1 year loan I should have paid 10% + compound interest which adds up to $1,104.71. The actual interest rate will be about 5.5% if I'm making monthly payments of $87.92. What am I missing here?
Update: This compound interest calculator results in the $1,104.71.