How are loans calculated?

Bryan, the "amortization" formula in post 9 is the basis for figuring stuff out, and pen and paper is fine, but if you want to slap it into a spreadsheet, just use the payment function ("PMT") because it already has that formula built into it.

PMT (rate, nPer, pv)

where,

rate = interest rate (.05/12 for you)
nPER = number of periods (10 years x 12 for you, or 120 monthly periods)
pv = Present Value (for you, the amount loaned, e.g. $100,000).

The spreadsheet looks like this and it shows you how the monthly payment stays the same, while the interest portion reduces over time and the the principal portion grows over time.

You can fiddle with the yellow numbers to see how your monthly payment varies:

loan.jpg
 
denverpilot said:
Heh. Type it into Google and you'll have mortgage and loan ads on your desktop for a month. :) Ask me how I know.
Click to expand...

Not a single one here, have been using them for years including today. WinXP and now Win7.
If you do as I suggested, just type it into google, a fully functioning calculator is the first thing that appears on the google page (not a link to somewhere else)
 
in excel

=PMT((annual interest rate as a decimal/12),#of months you'll make payments, $$ you are borrowing) then hit enter

so if you borrow 50K at 4% for 10 years (120 months)

=PMT((.04/12),120,50000)
 
The Google-fu you're looking for is "time value of money"
 
A small business loan on an aircraft worth about 40k is about 4.5% right now. Seemed incredibly high to me considering I just got a car loan for like 2.08% but airplanes are trickier to finance, or so I'm told by my banker. I don't know what it would be personally, but I'd guess 3-4% still.
 
What are the typical terms?

Being more transparent than I probably should.
I like to finance things for the longest possible term and then pay them off as quickly as I can.

It helps me sleep at night knowing if I lost my job, I could live on my savings and my silly want doesn't have a massive payment.

I am more likely to take out a 30 year note and pay it off in a few years if that is possible.
 
Re-fi your house and pull out all the equity....that's the cheapest way to the 30 yr term.
 
SixPapaCharlie said:
What are the typical terms?

Being more transparent than I probably should.
I like to finance things for the longest possible term and then pay them off as quickly as I can.

It helps me sleep at night knowing if I lost my job, I could live on my savings and my silly want doesn't have a massive payment.

I am more likely to take out a 30 year note and pay it off in a few years if that is possible.
Click to expand...

I just got a loan for my aircraft last year. I believe if the value of the plane is less than 65K you won't be able to get a loan over 15 years. If you go that far.

Some lenders may vary.

If you go over 65K you can stretch the term out to 20 years and at that point the interest rates go down as well.

On my loan I chose the zero-down option with a 15 year term. 5% is probably the norm for the interest rate, mine was 6.875% (don't exactly have pristine credit).

If you go with a 20 year note you can probably get rates under 5%, similar to a mortgage rate, maybe 3-4%. Those people in finance may argue with me, that's fine.

The lender I worked with said they basically treat the loan like a car loan with an extended term. Once you go past that 65K part it becomes more like a home loan..kinda weird.

Hopefully that helps.
 
SixPapaCharlie said:
What are the typical terms?

Being more transparent than I probably should.
I like to finance things for the longest possible term and then pay them off as quickly as I can.

It helps me sleep at night knowing if I lost my job, I could live on my savings and my silly want doesn't have a massive payment.

I am more likely to take out a 30 year note and pay it off in a few years if that is possible.
Click to expand...

Our terms are a 10 year loan with a 5 year balloon. The airplane is a 1974 and we put a little less than 20% down. We plan on having it paid off in the 5 years. Right now we have the airplane on a line of credit, just waiting for the loan folks to finish up whatever they need to do. YMMV because ours is a business loan.
 
Man this might be easier to just save and buy outright.
That puts the timing of my mid-life crisis at risk though.

If I push it another year, I am going to have to live 2 years longer.
 
SixPapaCharlie said:
Man this might be easier to just save and buy outright.
That puts the timing of my mid-life crisis at risk though.

If I push it another year, I am going to have to live 2 years longer.
Click to expand...

Why not have more than just one crisis?
 
SixPapaCharlie said:
Starting to look into aircraft loans as I may finance a chunk of it.

So it isn't just: loan * interest / term
Meaning If I get a loan for 10k @ 5% for 10 years, is not 10,000 *1.05 / 120

Thanks!
Click to expand...


You are using SIMPLE interest. Loans are based on COMPOUND interest ===> a 5% loan over 10years is 63% gross interest (assuming no paydown)

A monthly payment, equally spread over 10 years / 120 months would be $106.07 with a resulting gross interest of $2727.86 (27.3% gross interest) [ APR = 5% of balance per year ]
 
SixPapaCharlie said:
Man this might be easier to just save and buy outright.
That puts the timing of my mid-life crisis at risk though.

If I push it another year, I am going to have to live 2 years longer.
Click to expand...

Here's how you can get your own plane for the price of hangar rent:

1) Rent hangar (heck even a tie down would do) at an airport separate from where your dad's Cirrus is now.

2) Fly plane to new location

3) Call dad and follow this script:
"Dad, would you believe those bozos at the FBO ran into your plane AGAIN??? I know! Hey listen, I've already spoken to them and they are going to take care of it. I'll handle the whole thing."

4) Fly plane to your heart's content and schedule "return to service" right before annual is due.

5) Have dad pay for annual

6) Go to step #2
 
SixPapaCharlie said:
Man this might be easier to just save and buy outright.
That puts the timing of my mid-life crisis at risk though.

If I push it another year, I am going to have to live 2 years longer.
Click to expand...

We bought our first airplane cash. Highly recommend it.

Second we have the loan.

Third we bought cash but we have a loan agreement drawn up to our business.


TLDR; Cash is better.
 
I financed my plane through Red River State Bank (in MN, I'm in CA) based on some feedback from a good broker I talked to early on in the process. Their underwriting is all in house.

I financed 30k (20%down) and got a decent rate in the 6's. I have a 5 year loan on a 15yr amortization (they do this for a variety of reasons--the biggest is they figure that after five years you're going to want to do some upgrades or an overhaul and they'll write that into a new loan)

Lori Moen was my loan officer. Everything was simple and they got it done in about 10 days from application to wire transfer.

I had far from perfect credit (short sale in 2012) but have bought a new house since.


Sent from my iPhone using Tapatalk
 
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