The installment is the most tangible aspect for those who take out a personal loan. In fact it is with the installment that you will have directly to do in the repayment of the loan. But what does the amount of the installment depend on and how is it possible to calculate the personal loan installments? Let’s find out with the help of a simple example.
The calculation of the installments: the detail in the amortization plan
Before explaining how the personal loan calculation calculation works, it is good to specify what is meant by amortization plan . In fact, the person who grants the personal loan must provide the subscriber with a document containing the details of the loan repayment plan. This document lists the number of installments to be returned, also indicating the deadline. It is good to know that the calculation of personal or online personal loan payments, as indicated by the amortization plan, takes place in a special way. Usually in Italy the French amortization plan is used, ie there is a constant installment for the entire duration of the personal loan. The calculation of the installment that is used to fill out the amortization plan does not, however, subdivide on all installments the principal amount and the interest portion , which are instead divided into variable proportions. We have explained in detail this subdivision in the schedules relating to amortization plans and installment. Here we recall that the first installments are made up mostly of interest, while as the rate progresses, the latter decreases in favor of the principal amount.
The formula for the calculation of the installment
The calculation of personal loan installments is not easy to carry out independently; however anyone can have an idea of the amount of the loan installment even before signing, making an approximate calculation . Consider that the installment is given by the sum of the loan amount and interest , divided by the duration of the loan. Let’s take an example . Suppose a person has signed a loan of 10,000 euros to be repaid in five years with a monthly payment. Interest amounts to a total of 1,500 euros. The installment will therefore be equal to 10,000 euros + 1,500 euros, divided by 60, ie the number of months equal to five years. The monthly payment will therefore be equal to € 191.67.
From the example made, one understands how in calculating personal loan installments the determining factors are the interest , the amount of the loan and the duration of the loan itself. As the interest increases, so will the amount of the periodic installment, which will decrease with the increase in the repayment time.
Regarding the calculation of the interests, we refer to the specific guide. However, bear in mind that to evaluate this parameter it is always good to consider the interest called TAEG , which is more indicative than the TAN for the convenience of a personal loan.
If it is considered that autonomously calculating personal loan installments is too complex, or a more precise estimate of the real amount of the installment is desired, it is possible to use a personal online loan comparator , an instrument capable of simulating the amount of the installment and the duration of the loan simply by entering the parameters of interest.