Client took loan out for 6k January 2018 from her bank, payable over 5 years Interest is roughly 2k and is shown on agreement, but says it is accrued daily on outstanding loan, so would mean higher interest at the front end reducing. Do I need to work this out, and how would I do that, or can I divide the interest by 60 to apply to the accounts?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Yes, I've got the loan figure, the overall interest, and the APR (12.9%) so presumably I should work out the interest monthly based on the amount outstanding?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Hi John
Oh Im confused. I hate looking at other folks spreadsheets (especially when still got a headache from a busy weekend of booze!)
Is the £66 the interest for the first month (bottom of column D?) as that wouldnt be enough I dont think.
Also not sure where you have the 1827 days from. Sorry, I might be missing something!
For sum of digits I would be tempted to do the interest calc monthly (I know a purist would do it daly, but that would be 66000 lines of calc!)
Sum of digits works on a formula n * (N+1) / 2
n = number of months (or days if you insist).
For months this is literally the number of months ie 24 calculated as 1+2+3+4+5+6 etc answer is 300
ie using the formula 24 * (24+1) /2 = 300
Then you allocate the sum of digits to each month but kind of backwards
So interest for month 1 is calculated as 24/300 X £interest amount, say £2000 = £160 is interest in month 1
Month 2 23/300 X2000 = £153.32 is interest in month 2
Month 3 22/300 x 2000 =£146.67
Etc will show interest on reducing balance.
Hope Im making sense and my calcs are correct
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Joanne
Winner - Bookkeeper of the Year 2015, 2016 and 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
Hi John Oh Im confused. I hate looking at other folks spreadsheets (especially when still got a headache from a busy weekend of booze!) Lol I polished off my remaining 1/3rd bottle of Southern Comfort last night whilst watching the movie Skyscraper.
Is the £66 the interest for the first month (bottom of column D?) as that wouldnt be enough I dont think. Yes, it's over 5 years though.
Also not sure where you have the 1827 days from. Sorry, I might be missing something! 365 x 5 years + 1 day for leap year, then the +1
For sum of digits I would be tempted to do the interest calc monthly (I know a purist would do it daly, but that would be 66000 lines of calc!) Sorry, misunderstood you, thought I had to do it daily
Sum of digits works on a formula n * (N+1) / 2 60 x 61 = 3660 / 2 = 1830 n = number of months (or days if you insist). For months this is literally the number of months ie 24 calculated as 1+2+3+4+5+6 etc answer is 300 ie using the formula 24 * (24+1) /2 = 300
Then you allocate the sum of digits to each month but kind of backwards So interest for month 1 is calculated as 24/300 X £interest amount, say £2000 = £160 is interest in month 1 60 / 1830 x 2043 = £66.98 Harrah I have got it right, as it will be fractionally higher doing it monthly.
Month 2 23/300 X2000 = £153.32 is interest in month 2
Month 3 22/300 x 2000 =£146.67
Etc will show interest on reducing balance.
Hope Im making sense and my calcs are correct
Thanks Joanne, your help is much appreciated.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.