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How Do I Calculate Line Of Credit Payments?

The amount of principal and interest owed on a line of credit is required to determine payment amounts.
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  • Written By: N. Madison
  • Edited By: Jenn Walker
  • Last Modified Date: 06 October 2014
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Calculating line of credit payments often involves determining the amount of principal you owe as well as the interest rate you will pay on the credit line and using these numbers to calculate your payment. If you are making interest-only payments, dividing your annual percentage by 1200 may help you to figure out the amount you will need to pay on a monthly basis. If you are in a period of repaying principal as well, you will typically need to add your principal payment amount to your monthly interest payment. The sum of these numbers will be your line of credit payment for the month.

It is usually pretty easy to calculate line of credit payments. To start, you may need to contact your lender to obtain two pieces of critical information. You will need to know the total amount you owe on your line of credit as well as the current interest rate. While you may look in your own records to determine how much you owe in principle, contacting the lender for the current interest rate may be important. This is due to the fact that many credit lines have variable interest rates.

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Once you’ve obtained current information on the amount of money you owe and the current interest rate, you may use basic math to calculate line of credit payments. Starting with the annual percentage amount you receive from your lender, you may divide that percentage by 1200 to calculate the interest you will pay in a given month. If, for example, your annual percentage is 7.09 percent, you would divide this number by 1200 and get .0059. This is the monthly interest rate.

Alternatively, you could calculate a monthly line of credit interest rate by taking the annual percentage and dividing it by 12. If you had a 7.09 annual percentage, for example, and divided that by 12, you would get .5908. Then, you would need to divide this number by 100 to get your monthly interest rate, which would be .0059.

After calculating the monthly interest rate on your line of credit so that it is in decimal form, you may then use multiplication to calculate your interest payment. For example, if you owe $10,000 US dollars (USD) and your monthly interest in decimal form is .0059, your monthly interest payment would be $59 USD. To calculate this amount, you multiply the monthly interest in decimal form by the total amount of money you owe.

When you calculate your interest for line of credit payments, it is important to keep in mind that this amount doesn’t cover all that you owe. To pay off your line of credit, you will need to make payments on the principal as well. You may calculate principal payments by dividing the amount you owe by the number of months in which you will make payments. For example, if you are repaying $10,000 USD in 24 months, your monthly principle payment would be $416 USD. To this amount, you would then add your monthly interest payment, which may vary over the duration of your credit line repayment term.

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