Confusion about the Amortization Formula

[lorenzoleo]

---

Hello istoryans kinsa may nag work diri sa banks. Nag confuse jud ko sa Amortization na formulas:
There are two different formulas, unsa may ginagamit na fomula sa banks inig calculate sa amortization?

sample:

Amount = P2,000,000
D/P = 300,000
Balance/Principal = 1,700,000
Interest = 9% per Annum (0.0075 %/month)
Term = 5 years (60 mos)


Diminishing Computation =

(0.0075 x 1,700,000)/(1-(1+.0075)^(-60)) = 35,289.20

Straight Computation =

(1,700,000 + 5 (0.09 *1,700,000)) / 60 = 41,083.33


Asa may ginagamit jud sa banko? naglibog ko kay ako permi ginagamit kay Diminishing Computation permi.

[mamalitay]

im only a student but i think it should really be diminishing computation because it considers the TVM..and also, it's my first time to come across with straight computation as a method of amortization.

[jfox]

murag ang straight sa lending companies man guro na gigamit...ang banks murag diminishing pud ila gigamit.

[lorenzoleo]

Thanks for this info but most banks use Straight method, Hehehe! Dakoa jud ug ginansya nila. Money working for them jud.