Math Involved In Credit Card Script

webmasternovis

Hi all,

I'm really not sure if this is the correct forum, but anyways...

http://www.ditech.com/calculators/creditcard.html

I'm creating a script that does a similar job to that. It will work out how much a user will have to pay over 12, 24 and 36 months after they have entered their balance and interest rate.

But, how does this tool calculate the monthly amount? I thought it would just be balance + interest divided by the amount of months. Obviously that doesn't work though.

Would anyone be able to help? It seems more like a math question, although it will be being made into a script...

Thanks,
Mike

bpat1434

Amount of Interest: (Loan Amount x Interest Rate x # Months) / 2

(12,000 x 0.10 x 12) / 2 = 1,200 (over 12 months = 100 per month)

Loan + Interest = Total paid

<?php

$loan = $_POST['loan'];
$irate = $_POST['irate'];
$term = $_POST['term'];

$i_paid = ($loan*$irate*$term)/2;

$total = $loan+$i_paid;

echo 'You will pay ' . $i_piad . ' in interest and the total repayment will be $' . $total;
?>

Hope that helps.

webmasternovis

Thanks for your response.

I tried the $12,000, 10% and 12 months figures on the site I linked to in my first post, but the total came to $1,054. Do you know how this figure could be got with a script like yours above?

Thanks,
Mike

bpat1434

Simple algebra:

You know the amount, and the interest rate as well as the term they want. What you don't know is the monthly payment. Just rework the equation to solve for the monthly payment.

What my script doesn't take into account is payments. That $1054 amount is based on making payments in order pay off the debt at that interest rate in the time.

webmasternovis

Well I tried $13,200 ($12,000 + interest) divided by 12, but that comes to $1100. I'm not sure of another way to rearrange it, do you (or anyone) know of the correct way?

Thanks,
Mike

NogDog

I think the problem is that the interest is compounded monthly on the current balance at that point. That takes the math beyond the realm of truly "simple" algebra (and beyond me unless I really want to spend some time studying it).

Wikipedia article on Annual Percentage Rates

US FDIC regulations on determination of APR

bradgrafelman

Hmm... here's some sample code I found:

if ($percent > 1.0) $percent /= 100.0;
$p = 1;
for ($i = 0; $i < $years; $i++)
$result[$i] = $amount * ($p *= (1 + $percent));


print "<tr><td><b>Year</b></td><td><b>Amount</b></td></tr>\n";
foreach ($result as $year => $amt) print "<tr><td>".($year+1)."</td><td>$".number_format($amt,2)."</td/</tr>\n";

I've gotta run for now, but that shows you how to basically compound interest.

webmasternovis

Hmmm... the code just seems to add the balance and the interest. For example, $12k would return $13,200. Thanks for your suggestion though...

Do you, or anyone, know of any other functions that could be used for this? If I could find the basic equation for it the code should be quite easy to knock up.

Thanks,
Mike

Weedpacket

That online calculator uses Javascript; so you've already got what they use. Find that and port it to PHP. (It's pretty easy to figure out which .js file has the relevant code from the name.)

bpat1434

[cough]javascript functions[cough]