Interest Only Calculations

Interest only loans are easy to setup within Trakker.  Due to experience in dealing with these types of accounts the following is suggested.  Please note this type of setup is not required for this account to function properly.

When going through the New Loan Wizard you will need to keep your eye on a few items to make sure that the loan works properly. You can set up an interest only loan as either Simple Interest or Regular Amortizing.  Regular Amortizing is the suggested method due to the inherent nature of the calculations.  This is because regular amortizing accounts calculate the interest with the same number of days between each payment.  Simple Interest loans should be avoided when setting up an Interest Only Loan, unless specified by the accounting documents or your company's management.  The reason is due to the way simple interest accounts calculate each payment and its breakdown. Simple interest loans are based on the payment-received date and have a varying number of days between each payment.

As of version 2.2.0 of Trakker, you now have the ability to select Interest Only as a type of loan. This will instruct Trakker to only expect Interest payments.  Trakker will ask you what you want to do with any excess funds when posting payments.

Listed below is an example of an Interest Only Loan set up, and includes all calculations to show you how we got the numbers that are displayed.

Account Balance:                $2500.00

Interest Rate:                       10%

Term:                                    60 Months

Payment Freq.:                     Monthly

Balloon Due:                         $2500.00 on the 60th Payment

Payment:                              $20.83

Calculation to get the Interest Only Payment

                                            12 / (Balance * Rate) or 12 / (2500.00 * 10%)