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Loan Report
The annual payment for this loan will be $6,460.97.
Principal
Interest
Term
$6,460.97
The interest schedule is as follows:
Interest
$2,100.00
$1,489.46
Thus, the interest for Year 1 will be $2,100; the interest for Year 2 will be $1,489.46 and the interest for Year 3 will be $793.45.
The breakdown of interest and principle for each payment is as follows:
Payment
Interest
Principle
$6,460.97
$2,100.00
$4,360.97
$6,460.97
$1,489.46
$4,971.51
$6,460.97
$5,667.52
$19,382.92
$4,382.92
$15,000.00
Loan Summary
In order to meet some of our short-term financing needs, we have taken out a loan in the amount of $15,000. We worked with our bankers to secure the best possible interest rate available, which comes to 14%. The term of the loan is three years, with payments due at the end of each year. Thus, the first payment is due at the end of this year.
In order to service this loan, the payment due at the end of each year will be $6,460.97. The total for the three years will therefore be $19,382.92. The total loan service cost will therefore be $4,382.92.
It should be noted that the interest portion of each payment is tax deductible. The interest for the first year is going to be $2,100. The interest for the second year will be $1,489.46. The interest for the third year will be $793.45. The interest declines each year as the remaining principle on the loan declines. Thus, the interest for the first year is on the entire amount of $15,000. After the first year, the remaining principle will be $10,693.03. The interest for the second year will therefore be calculated based on that figure, not the original $15,000.
The same holds true for the third year. The remaining principle after two years will be $5,667.52. The interest for the final year will be calculated on that amount only. As a result, the interest for each year will decline. The overall payment will remain the same, but with each passing year the amount of principle that is paid off will increase.
These figures are presented to help you understand the ramifications of this loan and the payments that we must make to service it.
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