I see it like this. You have a product worth $1500 charged at 18%(per annum?) simple interest over 12 months the repayment would be (1.18 x $1500)/12 = $1770/12 = $147.50 per month.
I make websites and I want to provide financing for those who can't afford the full amount up front. The only payment plan I will have is 12 months. The interest rate will be 18%. Small monthly payments will benefit them more than me so I have to make it worth my while.
I understand taking the 18% and dividing by 12 months to get the monthly interest rate of .015
But how do you calculate the monthly payments and how much goes toward the interest and the principle each month?
The online calculators give me this based on $1500 - monthly payments of $137.52 and a total interest amount of $150.24.
How did they come up with $150.24 interest and the monthly rate?
That's how I was doing it... $1500 x+ 18% = $1770 / 12 = $147.50, which is fine because it pays me more. But all the online calculators were doing it differently, as I showed previously. Maybe they weren't using a simple interest, although that was my search criteria.
Even still, I would like to understand how they derived at their calculations regardless of their interest type.
Thanks for your response.
The formula to figure a monthly payment is over my head. It involves exponents in the minus power and other things I don't understand. So I guess that's it. I can't work out a amortization schedule without knowing what the monthly payments will be and I don't understand the formula for figuring out the monthly payment.
Thanks for your help anyway.
The only "legal way" I see to do this is call the 18% a "service fee of some kind"
and tack it on to the $1500, then call for payments at 0%, so $147.50.
Calculating the "real" monthly payment is not that complicated:
P = Payment (?)
A = Amount of loan (1500)
N = Number of months (12)
R = Rate monthly (.18/12 - .015)
P = A*R / [1 - 1 / (1 + R)^n]
P = 1500 * .015 / (1 - 1 / 1.015^12) = 137.51998... or $137.52