Actuarial Method is the process of distributing payments made on a debt between the amount provided as fund and also to the finance charge in accordance to which a payment is used first to the appended finance charge.

Calculator of  Actuarial Method Unearned Interest Loan

Currency =
Monthly Payment (p) =
Term periods (n) = months
Unearned term periods (u) = months
 
 
 
Annual Percentage Rate (V) = %

Formula of Actuarial Method Unearned Interest Loan

actuarial-method

where,

  • u = unearned interest
  • p = monthly payment
  • n = number of remaining monthly payments
  • V = the value from the APR table that corresponds to the annual percentage of loan rate for the number of remaining payments

Example of Actuarial Method Unearned Interest Loan

Consider that a person need to pay a monthly due of Rs 5000 for the period of 12 months. He had done the payment only for three months and the unpaid amount for the term is nine months. How to compute the annual percentage rate for the unearned term periods?

Given,

n= 12 months, p = 5000 u = 9 months

To Find,

Annual Percentage Rate

Solution:

Substitute the values in the formula,

9 = (12 * 5000 * V) / (100 + V)
9(100 + V) = 12*5000*V
900 + 900V = 60000V
59100V = 900
V = 900 / 59100
V = 0.015 %

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