One of the payment methods T-REX offers is Allocated Level Pay payment method.
With Allocated Level Pay, the payment will be fixed for the entire term of the period, and is calculated using the PMT function, on a yearly basis. The interest payment will be re-calculated based on the chosen month.
Example: Modeling one loan using Allocated Level Pay payment method.
- Balance: 1,000,000
- Rate: 5%
Allocated payment Calc. Month: October
Report:
Important to Note: The payment does not change over the life of the loan, the interest is re-calculated based on the beginning balance each October, and the principal is updated accordingly as well.
Calculation:
The calculation is yearly based, even if the payment periods are not yearly.
First, convert the term from months to years:
Then run the PMT calculation, based on the periods in years:
Divide the payment by the number of payment periods in a year, in this case monthly payments were selected, so it is divide by 12.
To calculate the interest, we will calculate the interest > (Interest Rate*#of payment periods in a year)* ending balance periods period.
If the month is the same month as the set Allocated Payment calc. month, in this case, October, the interest will be re-calculated. Otherwise, it will be the same as the previous period.
The principal is the interest subtracted from the payment.
Important to Note:
- Allocated Level Pay does not support previous prepay interest
- If the term divided by the # of payments a year is not rounded, it will be rounded up