Enter the original principal loan amount, monthly interest rate, number of payments made so far, and monthly payment amount into the calculator to determine the remaining balance of the loan.
Existing Loan Formula
The following formula is used to calculate the remaining balance of an existing loan.
RB = P * (1 + r)^n - (MP * ((1 + r)^n - 1) / r)
Variables:
- RB is the remaining balance of the loan ($)
- P is the original principal loan amount ($)
- r is the monthly interest rate (decimal)
- n is the number of payments made so far
- MP is the monthly payment amount ($)
To calculate the remaining balance of an existing loan, add 1 to the monthly interest rate and raise it to the power of the number of payments made so far. Multiply this result by the original principal loan amount. Then, subtract the product of the monthly payment amount and the difference of the raised monthly interest rate and 1, divided by the monthly interest rate, from the first result.
What is an Existing Loan?
An existing loan is a financial obligation, typically in the form of a mortgage, car loan, student loan, or personal loan, that a borrower has already taken out and is in the process of repaying. The terms of the loan, including the interest rate, repayment schedule, and total amount to be repaid, are usually set at the time the loan is originated and remain in effect until the loan is fully repaid.
How to Calculate Existing Loan?
The following steps outline how to calculate the Remaining Balance of an Existing Loan.
- First, determine the original principal loan amount ($).
- Next, determine the monthly interest rate (decimal).
- Next, determine the number of payments made so far.
- Next, determine the monthly payment amount ($).
- Next, gather the formula from above = RB = P * (1 + r)^n – (MP * ((1 + r)^n – 1) / r).
- Finally, calculate the Remaining Balance of the Existing Loan.
- After inserting the variables and calculating the result, check your answer with a loan calculator or financial software.
Example Problem :
Use the following variables as an example problem to test your knowledge.
original principal loan amount ($) = 10000
monthly interest rate (decimal) = 0.005
number of payments made so far = 12
monthly payment amount ($) = 500
