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The key to understanding the distinction is understanding accrued interest. When a payment is due and paid, the principal amount owed on the debt is the balance as shown on the amortization schedule. That's the remaining balance, and that's what this calculator is calculating.
But, one day later, after the payment is paid, the balance is no longer the same as it was the day before.
There is one day's interest due on the previous day's balance. This interest is known as accrued interest, and it is the reason the interest balance (and thus the loan balance) increases every day until the next payment.
The amortization schedule shows this repeating pattern. A payment gets applied to the accrued interest with the remaining amount used to reduce the principal balance, and the amortization table shows the balance after the payment (plus or minus a small rounding adjustment).
If you want to know the loan pay off amount (balance), including the accrued interest, then use the balloon payment calculator. A balloon payment is equal to the prior period's loan balance plus the accrued interest. That is, the balloon amount the balance on a scheduled due date, but before accounting for any payments.
Other uses for this Loan Balance Calculator
Need a loan with a specific balance?
At times a borrower might want to make a periodic payment that results in a specific balance after making payments for say four or five years. What should the monthly payment be to achieve this goal?
This calculator will tell you.
Enter the loan amount, interest rate, and balance after payment (48 months, for example, for four years). Then, rather than enter 0 for the loan balance after a payment number, enter the balance that you want and enter 0 for the periodic payment.
Pay the periodic payment amount calculated, and the loan balance will be the one you entered.
Check out the amortization schedule and see for yourself.
You can also calculate a particular loan amount or interest rate needed using the same technique.
Or you can calculate when the balance will be a particular amount.
The calculator is very flexible!
Help with Remaining Balance Calculator
The remaining balance calculator calculates the principal balance after a specified payment number. Example, if you have a four year car loan and you've made a year and a half of monthly payments (18 months), this calculator will tell you the balance of the loan.
Or given a desired remaining balance, the calculator will calculate one of the four other inputs. Use this calculator to tell you what your periodic payment needs to be to result in a specific balance after "X" payments have been made.
To calculate a loan balance, enter the original loan amount, say $28,500. Enter 6.5% for the "Annual Interest Rate" and 18 for the "Balance After Payment (#)". Enter your "Periodic Payment". We'll assume $675.88. Enter "0" (zero) for the "Loan Balance After Payment #". Leave the other setting set to their default values. Click the "Calc" button (or if you want to see a more detailed schedule, click "Payment Schedule" or for charts click the "Charts" button of course. (With this calculator, there is no need to click the "Calc" button first.) The result is $18,667.96.
NOTE: The actual balance may vary slightly. This is because the calculator calculates the balance after the payment. If some days have passed since the payment was made, then interest is accruing for those days since the last payment. You can use our Exact Day Compound or Simple Interest Calculator to calculate any odd days of accrued interest.
The "Payment Method" option is normally left set to "Arrears" for loans. You would use "Advance" for finding the balance of a lease. The difference between the two is this: If the first payment is due and paid on the same date that the loan was made, then you would set this option to "Advance", otherwise you would set this to "Arrears".