Partial amortization calculator

Anyone who has applied for a loan knows that finding the right loan plan for you can be a headache. What is the difference between a fully and partially amortized loan? What is a balloon payment (balloon credit)? You can find out about all this below.

• How to use the partial loan amortization calculator?
• What is a partially amortized loan (balloon payment)?
• Partial amortization formulas.

How to use the partial loan amortization calculator?

Let's see what all the terms used in our calculator mean:

• Credit amount - This is a loan that you take from the bank without a down payment. If you have made a down payment, fill it in the appropriate field.
• Interest - annual interest rate
• Term - loan payments are calculated for this amount of time. For example, if you have an amortization of 20 years, monthly payments are scheduled as if there were 240.
• Payment period - the time during which you periodically repay the loan. It must be shorter than the repayment period of a partially amortized loan.
• Payment frequency - the frequency of the borrower's payments on the loan, usually used monthly
• Compounding frequency - interest frequency
• Down payment - this is the amount of money you already have and can use to pay for real estate before you get a loan.
• Extra Payment - if you provide an additional recurring payment.
• Periodic payment amount - how much to return each period
• Balloon payment - lump sum is paid additionally after the end of the payment period.
• Total paid for the period - how much you paid in total in periodic payments.

What is a partially amortized loan (balloon payment)?

In a partially amortized loan, only a portion of the amount has to be repaid in monthly installments. An additional lump sum, called a balloon payment, is paid to the bank on the end date of the loan. For example, imagine that you want to get a loan in the amount of 100,000 $ at a 10% interest rate. The bank agrees to a 10-year maturity with a 20-year amortization schedule. This means that you will have to pay 10 years of payments in monthly installments and the rest after 10 years in one payment.

Balloon Payment is a large one-time loan payment, the amount of which significantly exceeds the size of a regular monthly payment. A balloon payment is made either at certain intervals, but more often once at the end of the loan term. Balloon payments are most commonly found on mortgages, but can occasionally be used on auto and consumer loans.

In exchange for large balloon payments, the borrower receives several benefits. Regular payments on such a loan usually involve only interest, so in the early stages, the borrower will spend significantly less than with standard repayment schemes, which involve a gradual repayment of the principal amount of the loan. More importantly, this type of loan often comes with a lower fixed interest rate, resulting in less overpayment in the long run. Often, a short-term balloon loan can be very beneficial for some borrowers.

Balloon payments are ideal for people with good investment sense and the ability to manage their spending rationally. By freeing up capital that would have to be used to pay higher payments under standard repayment schemes, balloon loans allow the savvy investor to use the freed-up funds. Such a loan is also beneficial for individuals who expect significant lump-sum income in the future, such as receiving an inheritance or paying dividends. Regardless of the source of origin, if the borrower's current cash flow is not future large inflows, balloon payment can be a very profitable choice.

Partial loan amortization formulas

Our partial amortization calculator uses two basic formulas:

Periodic Repayment Formula:MP = \dfrac{A - \dfrac{FV}{(1+pi)^n} }{ \dfrac{1}{pi} - \dfrac{1}{pi(1+pi)^n} }

• MP - periodic payment amount
• BP - balloon payment
• A - loan repayment amount
• pi - periodic interest rate
• n - number of periods

Balloon payment:BP = A(1+pi)^n - MP\dfrac{(1+pi)^n - 1}{pi}

• BP - balloon payment
• A - loan repayment amount
• pi - periodic interest rate
• MP - periodic payment amount
• n - number of periods