How to Calculate Equated Monthly Installments

by Carter McBride ; Updated July 27, 2017
Calculate equated payments to help organize your budget.

Equated monthly payments are loans payments which are in equal amounts each month of loan repayment. To contrast, variable payments will differ each payment on the amount due. It is beneficial to be able to calculate loan payments in order to plan monthly budgets. For example, a $10,000 loan, repayable in two years, that has an interest rate of 10 percent will require monthly payments of $461.45.

Step 1

Divide the interest rate by 12 to calculate the interest per month. For example, 10 percent divided by 12 equals 0.00833.

Step 2

Add 1 to the interest per month. For example, 1 plus 0.00833 equals 1.00833.

Step 3

Raise the number calculated in Step 2 by the power of the number of months of repayments. The number of months of repayments is an exponent. For example, 1.00833 to the power of 24 months, which equals 1.220391.

Step 4

Subtract one from the number calculated in Step 3. In the example, 1 minus 1.220391 equals 0.0220391.

Step 5

Divide the interest per month by the number calculated in Step 4. For example, 0.00833 divide by 0.0220391, which equals 0.037812.

Step 6

Add the interest rate per month to the number calculated in Step 5. For example, 0.00833 plus 0.037812 equals 0.046145.

Step 7

Multiply the principal by the number calculated in Step 6 to determine the monthly payment. For example, $10,000 times 0.046145 equals monthly payments of $461.45.

Tips

  • To simplify calculations use a spreadsheet program such as Microsoft Excel.

About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

Photo Credits

  • calculator image by Henryk Olszewski from Fotolia.com
Cite this Article A tool to create a citation to reference this article Cite this Article