If I have a loan of 1000 at a rate of 5% for 3 years compounded monthly, but I pay a 100 origination fee, do I calculate the loan on the original loan amount, or the reduced amount (1000-100)?

  • by "calculate the loan" do you mean find the regular payment, or the interest rate? – DJohnM Apr 20 '16 at 2:58

If I put the numbers you give and include the 36 monthly payments of =PMT(0.05/12,36,1000) into the XIRR function of Excel, then I get a "true" interest rate of 12.88%.

That up-front fee really whacks your interest rate!

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Yes, I'd use $900 as the amount borrowed, along with required payments and calculate the rate from there.

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