| Result | |
|---|---|
| Amount per payment period | $4,432.06 |
| Total of 24 Payments | $106,369.44 |
| Total Interest | $6,369.44 |
| Show/Hide Statistics Table | |
| Result | |
|---|---|
| Amount Due at Loan Maturity | $112,360.00 |
| Total Interest | $12,360.00 |
| Show/Hide Statistics Table | |
| Result | |
|---|---|
| Amount Received When the Loan Starts | $88,999.64 |
| Total Interest | $11,000.36 |
| Show/Hide Statistics Table | |
An installment loan is a common form of loan where the borrower repays the loan amount through fixed periodic payments, usually monthly, over the loan term. Each payment consists of two main components:principal (the original loan amount) and interest (the cost of borrowing based on the loan’s interest rate). This helps borrowers easily manage their finances, as they know in advance the fixed amount to pay each period, without surprises from fluctuations.
Installment loans typically have either a fixed interest rate or a variable interest rate, depending on the loan agreement. A fixed interest rate remains constant throughout the loan term, ensuring steady payments. Meanwhile, a variable interest rate can change according to the market, which may increase or decrease the amount due each period.
A key feature of an installment loan is the allocation of payments. Initially, a large portion of the payment goes toward interest since the interest is calculated based on the remaining loan balance. Over time, as the principal decreases, the portion of the payment applied to interest will decrease, while the portion going to the principal will increase.
The annuity formula helps calculate the fixed payment for each period:
PMT = P * r * (1 + r)^n / ((1 + r)^n - 1)
Where:
PMT: Fixed payment for each period (usually monthly).P: The original loan amount (principal).r: Periodic interest rate (monthly interest rate = annual interest rate divided by 12).n: Total number of payment periods (months or periods).For example, if you borrow 100 million VND at an annual interest rate of 6% for 2 years (24 months), you can calculate the fixed monthly payment to repay both the principal and interest using this formula.
The advantage of an installment loan is the ability to break a large sum into smaller payments, making it more manageable with monthly income. This allows borrowers to access large loans such as for home or car purchases, or for consumption, without immediate financial pressure. By making regular payments, borrowers can plan long-term expenses and effectively control their budget.
In summary, an installment loan is a flexible solution that allows borrowers to access a large sum of money and repay it gradually through fixed payments.
A balloon loan is a type of loan where the borrower receives a large sum from a bank or financial institution without needing to repay it immediately. Instead, the borrower repays the entire loan amount, including interest, at the maturity date, typically at the end of the loan term.
Lump-sum payment: The borrower only needs to make a single payment when the loan is due, which reduces the financial pressure from regular monthly payments.
Interest rate: This type of loan usually comes with an interest rate that may be fixed or variable according to the market. The interest is calculated on the outstanding balance throughout the loan term.
A = P * (1 + r)t
Where:
Advantages: A balloon loan offers flexibility, allowing borrowers to use the funds for other purposes without worrying about monthly payments.
Disadvantages: However, the financial pressure may increase at maturity, as borrowers need to prepare a large sum to repay the loan. Therefore, careful financial planning is essential to avoid debt risks.
Bonds are a financial instrument used to raise capital, where the bond issuer (typically a government or business) commits to returning a predetermined amount, called the bond’s face value, to the investor at a specified future date known as the maturity date. During the bond’s holding period, the investor receives periodic interest payments, usually annually or semi-annually.
Face value: This is the amount the issuer will repay to the investor when the bond matures.
Interest rate: Bonds come with a fixed or variable interest rate, which determines the income the investor will receive.
Maturity period: The period until the bond matures can range from a few months to several years.
C = P × r
Where:
Bonds are an attractive investment option for those seeking stable income and capital preservation. However, investors should also be aware of associated risks, such as market interest rate changes and the issuer’s ability to meet payment obligations.