Calculating your remaining balance and other things... - Toyota Yaris Forums

jkuchta · 12-04-2008, 11:48 PM

I don't think the above formula is correct as it doesen't take into account the fact that the interest owed (and therefore included in your monthly payment) is calculated more than once a year. As you make payments, you reduce the principle amount that you owe. The interest you pay is based on the principle that you owe. As you make payments, the amount of that payment that gets applied to interest goes down

i.e. a lot of the money you pay in your first few payments goes to interest, whereas the bulk of the money you pay towards the end of your loan term goes to pay off principle, as the principle is small, so the accrued interest is small.

If I were any good at math, I'd figure out the formula.

12-04-2008, 11:48 PM	#6
jkuchta View User's Garage Drives: 2007 Yaris hatch (red) Join Date: Sep 2007 Location: L.A. Posts: 557	I don't think the above formula is correct as it doesen't take into account the fact that the interest owed (and therefore included in your monthly payment) is calculated more than once a year. As you make payments, you reduce the principle amount that you owe. The interest you pay is based on the principle that you owe. As you make payments, the amount of that payment that gets applied to interest goes down i.e. a lot of the money you pay in your first few payments goes to interest, whereas the bulk of the money you pay towards the end of your loan term goes to pay off principle, as the principle is small, so the accrued interest is small. If I were any good at math, I'd figure out the formula.