Recently we have received many inquiries as to how is the amortization schedule calculated. We understand that there must be questions that you have and our FAQ page is not providing enough information, so we hope the following would help answer some.
How it works
As an example, let’s take a loan with term 90 days and payment frequency every 30 days (3 payments), the loan amount is 5.00000000 BTC.
Let’s say you choose 1% interest rate for the period. Which means 0.01/3= 0.0033333333% for a month. We use the equal payment method which means that each payment includes the accrued interest on the unpaid balance, plus some principal.
This is how the equal payments are calculated:
In this case, each payment will be 1.67779009 BTC. A portion of that payment covers the interest you owe, and a portion of the payment pays down your principal. When subtracting the principal from the loan amount, you are able see how much principal is left to be paid. The interest on the next payment is calculated on the remaining unpaid balance of the principal.
To get a better grasp of this concept, let’s see the numbers:
I payment: We’ve already showed you the payment amount will be 1.67779009 BTC. The interest for the first payment is 0.00333333333 * 5.00000000 BTC = 0.01666666666. The principal amount of the payment is 1.67779009 – 0.01666666666 = 1.66112344 BTC . In this case, the BLC fee is calculated by taking 1% of the principal amount of the payment. The unpaid balance of the principal is 3.33887656 BTC.
II payment: Again multiplying the principle balance owed by the periodic interest rate to get the interest for this payment 0.00333333333 * (5.00000000 – 1.66112344) = 0.01112958 BTC. (5.00000000 – 1.66112344) is the unpaid balance of the loan amount. The principal amount of the payment is 1.67779009 – 0.01112958 = 1.66666051
III payment: The third payment is identical to the previous ones.
0.00333333333 * (5.00000000 – 1.66112344 – 1.66666051) = 0.00557405 (Periodic rate * the unpaid balance ). The principal amount of the payment is 1.67221605 BTC.
Please remember, the rate you choose specifies how much interest to charge from the principal, it doesn’t set what you get in the end.
We have set 1% interest rate, but when we calculate it we will see that the gain interest is 0.6674056%. This difference is due to the fact the interest on each subsequent payment is calculated on the reduced principal.
We hope the information above provides you with sufficient explanation and encourage all members to contact us if any further questions or concerns occur. The BitLendingClub Team will be glad to help you. Meanwhile, we are continuing to work hard to spread the word to more and more investors and borrowers that they can get a better deal at BitLendinhgClub.
The BitLendingClub Team