How to Calculate a Loan Amount

This tutorial sets up the Ultimate Financial Calculator to calculate the loan amount for a conventional loan or mortgage with a specified regular payment amount, interest rate and a known term. Frequently, when structuring a loan, a borrower will be able to afford a specific payment at the prevailing interest rate. For this reason, using a financial calculator to calculate the loan amount is a very common financial calculation.

All users should work through the more detailed first tutorial to understand the Ultimate Financial Calculator's (UFC) basic concepts and settings.

To solve for an unknown loan amount and create a schedule, follow these steps.

1. Set "Schedule Type" to "Loan"
   • Or click the [New] button to clear any previous entries.
2. Set "Rounding" to "Adjust last interest" by clicking on the {Settings} {Rounding Options}
3. In the header section, make the following settings:
   1. For "Calculate Method" select "Normal".
   2. Set "Initial Compounding" to "Monthly".
   3. Enter 5.0 for the "Initial Interest Rate".
4. Create a "Loan" series in row one of the cash flow input area.
   1. Set the "Date" to June 25, 2016
   2. Set the "Amount" to "Unknown" by typing a "U" Fig. 1
   3. Set the "# Periods" to 1
      • Note: Since the number of periods is 1, you will not be able to set a frequency.

5. Click on the second row of the cash flow input area. Select "Payment" for the "Series"
   1. Set the date to July 25, 2016 if it isn't already
   2. Set the "Amount" to "450.00"
      • This tells the calculator that the regular payment will be $450.00 a month until the loan is paid off.
   3. Use the [Tab] key to move to "# Periods". Set it to "48"
   4. Set the "Frequency" to "Monthly"
      • The "End Date" will automatically be calculated, 06/25/2020 (48 monthly periods is 4 years)

• Your calculator should now look like this:

6. Calculate the unknown. The amount that you can borrow is $19,540.33. Fig. 2

7. To see a detail amortization schedule, showing the monthly payment allocation to principal and interest, click on the [Schedule] button above the input area.

• Note: The amount of the loan is this cash flow's present value.

• We have several financial calculators which are capable of calculating a loan amount. The Ultimate Financial Calculator will do so for a complex payment stream with possible interest rate changes and even payment changes.