Understanding payment plan calculations

axiUm Ascend uses industry-standard formulas for determining the amortization of a payment plan based on the specified number of payments, payment amount, annual percentage rate, and payment interval.

P = r(A) / 1-(1+r)^-n
(where P is the payment amount, r is the periodic rate, A is the amount being financed, and n is the number of payment periods per year)

r = (1+i)^1/n-1
(where r is the periodic rate, i is the annual percentage rate, and n is the number of payment periods per year)

Note: The number of payment periods per year for monthly payments is 12; for bi-weekly payments, 26; and for quarterly payments, 4.

Example:

During checkout on January 15^th, Sally says she would like to pay $50 toward her account balance of $220 today and the rest over time. She says she can pay $50 bi-weekly until it's paid off. You offer her a %2 annual percentage rate. She agrees to the terms. You take her $50 down payment, and then you set up a payment plan for the remaining balance of $170.

The following table illustrates how the financed amount will be amortized, showing how much of each payment goes toward principle, how much goes toward interest, and the running balance.

Note: The periodic rate (r) for bi-weekly payments in this example is 0.00076192. Each payment period's interest is the product of the periodic rate and the previous balance (r x Balance).

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