How to Calculate the Amount Owed on a Loan

How to Calculate the Amount Owed on a Loan
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One of the big questions you have after purchasing something on credit, is how much you still owe on the loan. This is especially relevant if you bought a car or home and are planning to sell it. You wonder if the sale price will be enough to pay off your existing loan. Unfortunately, market forces can cause people to be upside-down on their loans when the market value of the item is less than the amount owed on the loan.

Find your most recent loan statement. If you manage your loan online rather than on paper, log into the loan servicing website to find this information.

Locate the remaining balance of your loan; it is sometimes called the principal balance or the amount outstanding. This amount is the money you borrowed that has not yet been repaid. If you have trouble finding this amount, call the phone number on the bill for help.

Look up the date of your last payment. This is important because interest accrues on a loan on a daily basis, so the actual amount owed on the loan will be greater than the remaining balance.

Divide your annual interest rate by 360 to find the daily interest rate. For example, a loan at 5 percent APR will have a daily interest rate of .0139 percent.

Multiply the remaining balance on your loan by the number of days since the last payment and the daily interest rate expressed as a decimal. Move the decimal point two places to the left to change the percent interest to a decimal. For example, with a balance of $4,700, 23 days since the last payment, and a daily interest rate of .0139 percent or .000139, you will owe $15.01 in interest.

Add the amount of interest owed to the balance of the loan to find the total amount you owe on the loan. In the above example, add $15.01 to $4,700 to find a total amount owed of $4715.01.

Tips

  • Some loans charge a prepayment penalty for paying off the loan before its term is over. Check your loan agreement to see what the prepayment penalty is before you decide to pay the loan in full and close it. If you have a prepayment penalty, you may be better off keeping that loan and using your money to make payments on a different loan that doesn't have a prepayment penalty. When you are paying off a loan in full, add five days to the number of days since the last payment when calculating interest owed, because it is unlikely that the payment will be applied immediately. Any extra money will be returned to you.