8. Calculating an installment loan payment using simple interest Calculating the Loan Payment on a Simple-Interest Installment Loan Installment loans allow borrowers to repay the loan with periodic payments over time. They are more common than single-payment loans because it is easier for most people to pay a fixed amount periodically (usually monthly) than budget for paying one big amount in the future. Interest on Installment loans may be computed using the simple interest method or the add-on method For an instaliment loan using simple interest and equal payments throughout the life of the loan, a portion of each repayment is dedicated to the principal and a portion to the interest. Remember that interest is charged only on the outstanding balance. This means that as each payment is made, more of it is allocated to The following table lists the monthly instaliment payment amounts required to repay $1,000 over various time frames and at various fixed-interest rates. The payment is the same each month, and the allocation between principal and interest is always Monthly Installment Loan Payments to Repay a $1,000, Simple Interest Loan Number of Monthly Payments Rate of Interest 12 24 36 48 60 72 84 5 $16.10 $29.97 $30.42 6 $85.61 $43.87 586.07 $44.32 $86.53 $44.77 $36.99 $45.23 $23.03 $23.49 $23.95 $24.41 $18.87 $19.33 $19.00 $20.20 $14.13 $14.61 $15.00 7 $16.57 $17.05 $17.53 530.88 $31.34 6 $15.59 To estimate the required monthly payment amount for an installment loan, divide the amount to be borrowed by 1,000 and multiply the result by the appropriate iure from the tanie or Suppose that you are repaying a personal loan in the amount of 523,000. The rate of interest on the loan is 14, and you have agreed to pay back the incin 72 monthly payments Using the values in the preceding table complete the following steps to calculate the required monthly payment amount for this loan Step 1: Divide the amount of the loan by 1,000. Dividing $23,000 (loan amount by 1,000 give you a value of Step 2: Use the rate of interest and the number of monthly payments to identify the appropriate figure to use from the table. In this case, the rate of Interest is 14%, and the loan requires 72 monthly payments. Therefore, the relevant amount from the table is s Step 3: Multiply your answer trom Step 1 by the appropriate value from the table cell (from Step 2). This gives you a required monthly payment amount of 5 Calculate your total payments and finance charge by completing the following table. (Note Enter allgures as positive numbers to two decima places.) Total Payments Loan Amount Finance Charge $23,000.00 5