# Calculate First Loan PMT when Annual Escalation applicable

1. ## Calculate First Loan PMT when Annual Escalation applicable

Hi,

Can anyone maybe help me with a formula to calculate the initial payment on the following transaction please:
Capital: R41 800 000,
Annual interest rate: 14.5%
Type: In Arrears
Annual Escalation: 10%
Term: 60 months
Compound: Daily

I need a formula to calculate the initial PMT’s keeping in mind the Term must remain the same (60mths)
1) Monthly?
2) Quarterly?

My “bank” calculated the initial payments but they are “not able” to give or tell me how
1) First month pmt = R825570
2) First Quarterly pmt = R2 622 500

2. ## Re: Calculate First Loan PMT when Annual Escalation applicable

Hi there,

Does the Annual Escalation Rate apply to the Repayment Amount?

I.e. if you repay R1.0 M per month for the first twelve months, do you repay R1.1 M for the next twelve months?

Regards,

Greg M

3. ## Re: Calculate First Loan PMT when Annual Escalation applicable

Hello Greg,

Yes, the annual escalation must be applied to the repayment amount after the first 12 months. The problem is that the loan will now be paid off over a shorter term. The only way to prevent this is to start the first 12 months at a lower premium and then escalate.
In other words payment must start at a lower premium and escalate annually to eventually pay off the R41 800 000 capital amount over the same term (60 months).

Due to interest implications (because of the reduced premium) the total repayment amount will be higher than the total repayments for a loan with constant payment. I have tried to keep the total repayment amount the same but it is not giving me the correct initial premium as indicated by the bank.

Kind regards

Flip

4. ## Re: Calculate First Loan PMT when Annual Escalation applicable

Hi again Flip,

According to my calculations in the attached workbook, your initial repayments should be:

Monthly : R829,611.27

Quarterly : R2,519,147.98

At least you can have fun asking your "bank" to explain where my calculations are incorrect!

Hope this helps - please let me know how you get on.

Regards,

Greg M

5. ## Re: Calculate First Loan PMT when Annual Escalation applicable

Good morning Greg,

Thank you very much for your response and assistance. I will let you know what the outcome is!

Regards

Flip

6. ## Re: Calculate First Loan PMT when Annual Escalation applicable

Hi Flip,

I will let you know what the outcome is!

Please do - I'll be very interested

Regards,

Greg M

7. ## Re: Calculate First Loan PMT when Annual Escalation applicable

I am looking for a formula to work out initial installment when:
1. Period = 60 month
2. Interest rate = constant
3. Payments escalate every 12 months by fixed escalation rate
4. PV remains the same
5. FV = Zero

Is there a formula that can calculate the first installment in excel?

8. ## Re: Calculate First Loan PMT when Annual Escalation applicable

Welcome to the forum.

We are happy to help, however whilst you feel your request is similar to this thread, experience has shown that things soon get confusing when answers refer to particular cells/ranges/sheets which are unique to your post and not relevant to the original.

Please see Forum Rule #4 about hijacking and start a new thread for your query.

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