How to Calculate Amorization
- 1). Figure out the interest rate for the payment period of the loan. Call the bank where you want to get your loan from and ask them what the interest rate of the loan will be.
- 2). Figure out how long you want to pay back the loan and therefore the number of payments you will make. Ask yourself if you want to pay off the loan in a couple of years or in a decade. Be reasonable; do not make the payoff 50 years.
- 3). Figure out how much you need to borrow. This figure will be your principal amount, which is the actual amount that will be borrowed without including the interest.
- 4). Add 1 to the interest rate then exponentially multiply it by the number of payments.
- 5). Multiply the principal amount of the loan by the interest rate then multiply the result by the number in Step 4.
- 6). Use the number found in Step 4 and reduce it by 1.
- 7). Divide the number in Step 6 by the number found in Step 5. This is your monthly payment.
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