Interesting and Humour - page 4856
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Pavel Gotkevitch
Yes, I agree, I made a mistake. But all the same, why bother with an incomprehensible and confusing formula when there is simple, understandable logic to calculate it?
Wait, if your formula is correct, why do I get26478.9975 and you get a different amount per month using my simple calculation logic? After all, I calculated the overpayment by adding 125 per cent to the loan amount. I added it to the principal and divided it by the total number of months. I did the right thing. Loan + overpayment + interest/per number of months.
Each payment contains a direct part of your debt (total loan amount/number of months) + interest.
But in the first payment you have the minimum part of the debt and the maximum part of the interest.
With each subsequent payment, the share of the debt you pay increases and the share of interest decreases. With the last instalment, you only pay the debt without interest.
It is not possible to calculate such a monthly payment correctly and accurately with a simple method. That is why the Spitzer formula is used.
By the way, when you take out a loan with equal payments, the interest you actually pay is higher than that declared by the bank.
For instance, at 5% per annum you actually pay 5.12%, while at 8% you already pay 8.30. This is because of the Spitzer formula.
This kind of inflated interest is called "discountedinterest".
P.S. I came up with a correct and honest formula for an equal monthly payment, 25 years ago, where there is no "discountedinterest",
and a comparative formula for the real and "discounted interest" (the higher the interest, the bigger the difference between that interest and the "discounted interest").
The difference is not that significant, but it is certainly advantageous for banks to useSpitzer's formula.
Well, we have already seen that the margin of error there is not 0.1, but 0.25. And I don't agree that it doesn't solve it. In the mortgage example, it's almost a 9,000-ruble loss. And that's just from one family. What about a hundred families, what about a thousand, what about 10,000? 900 000, 9 000 000, 90 000 000? And then why is there an error in the formula that shouldn't be there? Agree on a loan + overpayment, it must be a loan and overpayment, not a loan + overpayment + error.
10000+0.1%=10010
Does that solve anything? It's roughly like "Already saved up for an item for 1000, but only 900 short".
The margin of error is dust.
Unfortunately, the bank formula above is not correct! It is a cheating formula, not the only correct one. It is also confusing. According to a non-fraudulent contract, it should be like this:
Total repayments (TR) = Loan (R) + Overpayment (O).
IS = 100 + 5 = 105, but not 105.25
Everything is clear with the loan, but the concept of overpayment should be clarified.
If overpayment is a certain amount of interest on the loan amount, overpayment should be equal to the loan divided by one hundred and multiplied by that amount of interest.
P = Z/100*KP, where KP is the amount of interest.
If we have to overpay 5 per cent in 1 year, we have to overpay that 5 per cent 25 times in 25 years. That is, overpay 125 per cent.
P = 100/100*5 = 5 rubles!
P =3,530,533/100*125 = 4413166.25 rubles
IS =3530533+4413166.25 = 7943699.25
MS (Monthly amount paid) = IS/HM (Total number of months)
MS =7943699.25/300 = 26478.9975
When you take out a mortgage, or other loan with a repayment schedule, with each payment you not only pay the accrued interest, but also reduce the body of the loan. So further interest accruals become lower in absolute terms, although the rate remains the same.
Captain Hindsight.
When you take out a mortgage or other loan with a repayment schedule, you not only pay the accrued interest with each payment, but you also reduce the body of the loan. So further interest accruals become lower in absolute terms, although the rate remains the same.
Captain Hindsight.
the "with every payment" thing is a bit off, readthe fine print:-)
the "with every payment" thing is a bit off, readthe fine print:-)
There are two systems of accrual and repayment. When the payments include the "body" of the loan this is the second accrual algorithm. But in most cases, read the fine print in the contract, the interest is paid first without repayment of the "body" and then only the "body". One delay and the month is unprotected, even though the interest has been paid, so it is more profitable to keep the person always on the hook.
Beautiful!