# Thread: Changed loan terms, what did I lose?

1. ## Changed loan terms, what did I lose?

Hi, first time posting here, great forum BTW.

I have been negotiating a relocation package with my company and they originally agreed to provide an interest free 5 year loan for $45,000 to be paid back by me in equal amounts annually. The terms have now changed to 3 years and I'd like to know the value of the money I've lost due to this change. Basically over the 3 years I will be short$6000 each year in comparison to the 5 year loan. So from my perspective I will be short $18000 plus interest at the end of 3 years. How do I calculate this interest? Would I just take the future value of the$18k at, say 6.0% interest/yr? Should this be compounded?

Thank you in advance for your assistance!

2. Originally Posted by Psyclone*Jack
Hi, first time posting here, great forum BTW.

I have been negotiating a relocation package with my company and they originally agreed to provide an interest free 5 year loan for $45,000 to be paid back by me in equal amounts annually. The terms have now changed to 3 years and I'd like to know the value of the money I've lost due to this change. Basically over the 3 years I will be short$6000 each year in comparison to the 5 year loan. So from my perspective I will be short $18000 plus interest at the end of 3 years. How do I calculate this interest? Would I just take the future value of the$18k at, say 6.0% interest/yr? Should this be compounded?

Thank you in advance for your assistance!
What you need to do is calculate how much you need to deposit today at 6% to meet the two loan repayment schemes. What you have lost is the difference between these amounts.

I make the amount for the 5 year loan 46911.27, and for the 3 year loan 55095.18, so you are losing in current value about 8183.91 dollars.

RonL

3. The loan repayment will be taken out of future bonus payments made annually to me, I should have clarified that.

So the change in the term is reflected in a decrease in my bonus payment over the next three years, a decrease of $6000 per year, in order to make payments of$15000/yr. I've calulated the compounded interest on that at 1.19*$18000 =$3438. Does that seem like the correct way to look at this?