Sinking Fund Loan
A common method of repaying a debt is to pay interest as it falls due and to set up a sinking fund that accumulates the principal that is needed to pay off the interest only loan.
In previous versions of FinKit, the user had to combine the Balloon Payment Loan and the Sinking Fund calculations in order to arrive at a periodic payment as described in the Sinking Fund examples.
The Sinking Fund Loan calculation provides an easy way to calculate the periodic payments when the payment intervals for both the interest only loan and the sinking fund are equal.
You will still need to use the previous method when the payment intervals for the interest payments and the sinking fund payments differ.
To view the amortization schedule, select the Show Details command in the Calculation menu.
To toggle between date and year/period view, click the first column header in the Details.
To change the start date, select the Start Date command in the Edit menu to open the Date Options dialog.
Input
| • nominal annual rate for loan |
| • nominal annual rate for sinking fund |
| • compounding frequency |
| • payment frequency |
| • number of years or payments |
| • loan amount |
Results
| • periodic payment |
| • interest only / sinking fund fractions |
| • total paid |
| • total interest |
Examples
| • | A debt of $10,000 is to be amortized with equal monthly payments over the next ten years, the first payment due in one month. Payments cover the interest on the outstanding debt at 6% compounded monthly, and the deposits into a sinking fund to pay off the principal at the end of the loan. Interest for the sinking fund is at 5 % compounded monthly. What will be the total interest charge for a fixed principal loan?
Answer: $3,727.86. |
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| • | Using the same data, what would be the total interest charge if interest for the sinking fund were at 7%?
Answer: $3,322.46. |
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| • | Using the same data, what would be the total interest charge for a standard loan? Just switch to the Installment Loan calculation and look up the Total interest result. Answer: $3,322.46. Note: you would obtain the same result when the interest rate for the sinking fund were at 6 %. |
Related topics
| Nominal annual rate |
| Compound interest |
| Installment Loan |
| Rule of 78 Loan |
| Balloon Payment Loan |
| Interest Only Loan |
| Fixed Principal Loan |
| Prepaid Interest Loan |
| Extra Principal Payments Loan |