Lære Loan Amortization Calculations | Risk Assessment and Loan Analytics

Loan amortization is the process by which a borrower repays a loan through regular, fixed payments over a specified period. Each payment covers both the interest accrued on the outstanding balance and a portion of the principal. In banking, understanding amortization is crucial because it affects how much interest a customer pays over the life of a loan and how quickly the loan balance decreases. For banks, amortization schedules help predict cash flows, manage risk, and provide transparent information to customers about their repayment obligations.


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def calculate_monthly_payment(principal, annual_rate, years):
    """
    Calculate the fixed monthly payment for a loan using the amortization formula.

    principal: total loan amount
    annual_rate: annual interest rate as a percentage (e.g., 6.5 for 6.5%)
    years: loan term in years
    """
    r = annual_rate / 100 / 12  # Monthly interest rate as decimal
    n = years * 12  # Total number of monthly payments
    if r == 0:
        return principal / n
    payment = principal * (r * (1 + r) ** n) / ((1 + r) ** n - 1)
    return payment

# Example usage:
monthly_payment = calculate_monthly_payment(250000, 6.5, 30)
print(f"Monthly payment: ${monthly_payment:.2f}")

The amortization formula works by spreading out both the interest and principal repayment over the loan term so that each monthly payment is the same amount. First, you determine the monthly interest rate by dividing the annual rate by 12 and converting it to a decimal. Then, you calculate the total number of payments by multiplying the number of years by 12. The formula uses these values to compute the fixed payment amount. To create a full payment schedule, you start with the initial principal and, for each month, calculate the interest for that month and subtract the principal portion from the balance. This process is repeated until the loan is paid off, generating a detailed schedule showing how much of each payment goes toward interest and principal.


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import pandas as pd

def generate_amortization_schedule(principal, annual_rate, years):
    r = annual_rate / 100 / 12
    n = years * 12
    payment = calculate_monthly_payment(principal, annual_rate, years)
    balance = principal
    schedule = []

    for i in range(1, n + 1):
        interest = balance * r
        principal_paid = payment - interest
        balance -= principal_paid
        schedule.append({
            "Month": i,
            "Payment": round(payment, 2),
            "Principal Paid": round(principal_paid, 2),
            "Interest Paid": round(interest, 2),
            "Remaining Balance": round(max(balance, 0), 2)
        })
    return pd.DataFrame(schedule)

# Generate a schedule for a $250,000 loan at 6.5% over 30 years
df = generate_amortization_schedule(250000, 6.5, 30)
print(df.head())

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Seksjon 2. Kapittel 6

Spør AI

Spør om hva du vil, eller prøv ett av de foreslåtte spørsmålene for å starte chatten vår

Suggested prompts:

Can you explain how the principal and interest portions change over time?

How can I generate a full amortization schedule for a different loan amount or interest rate?

What does the output table represent in the context of loan repayment?

Sveip for å vise menyen


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def calculate_monthly_payment(principal, annual_rate, years):
    """
    Calculate the fixed monthly payment for a loan using the amortization formula.

    principal: total loan amount
    annual_rate: annual interest rate as a percentage (e.g., 6.5 for 6.5%)
    years: loan term in years
    """
    r = annual_rate / 100 / 12  # Monthly interest rate as decimal
    n = years * 12  # Total number of monthly payments
    if r == 0:
        return principal / n
    payment = principal * (r * (1 + r) ** n) / ((1 + r) ** n - 1)
    return payment

# Example usage:
monthly_payment = calculate_monthly_payment(250000, 6.5, 30)
print(f"Monthly payment: ${monthly_payment:.2f}")


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import pandas as pd

def generate_amortization_schedule(principal, annual_rate, years):
    r = annual_rate / 100 / 12
    n = years * 12
    payment = calculate_monthly_payment(principal, annual_rate, years)
    balance = principal
    schedule = []

    for i in range(1, n + 1):
        interest = balance * r
        principal_paid = payment - interest
        balance -= principal_paid
        schedule.append({
            "Month": i,
            "Payment": round(payment, 2),
            "Principal Paid": round(principal_paid, 2),
            "Interest Paid": round(interest, 2),
            "Remaining Balance": round(max(balance, 0), 2)
        })
    return pd.DataFrame(schedule)

# Generate a schedule for a $250,000 loan at 6.5% over 30 years
df = generate_amortization_schedule(250000, 6.5, 30)
print(df.head())

Alt var klart?

Takk for tilbakemeldingene dine!

Seksjon 2. Kapittel 6

Loan Amortization Calculations

1. What is the purpose of a loan amortization schedule?

2. Which variables are needed to calculate a fixed-rate loan's monthly payment?

3. How can pandas help in generating a payment schedule?

Loan Amortization Calculations

1. What is the purpose of a loan amortization schedule?

2. Which variables are needed to calculate a fixed-rate loan's monthly payment?

3. How can pandas help in generating a payment schedule?