Example: Repayment of Installment Loans (SAP Library

Example: Repayment of Installment Loans

A repayment amount is calculated, that is then deducted from the employee’s pay in each loan period. This repayment amount consists of a repayment share and an interest share. The repayment amount remains constant, but the interest share decreases and the repayment share increases during the loan period.

Because of the interest deductions, the term of the loan cannot be directly deduced from the rate of repayment for this loan type.

Prerequisites

Loan amount paid out	30,000 euro
Interest rate	5 % p.a.
Annuity installment	250 euro
Interest calculation frequency	Monthly
Repayment frequency	Monthly
Repayment start date	One year after loan has been paid out

Loan Calculation

In the first twelve months, interest accrues every month, which increases the balance of the loan and the interest. In the first month, the interest is 125 euro, in the twelfth month it is 130.31 euro, so that the loan balance increases to 31,404.02 euro before the first repayment.

From the first annuity installment, 130.85 euro is allotted to interest and 119.15 euro to the regular repayment.

The total term of the loan, including the first year when no repayments are made, amounts to almost 27 years.

The amount that the employee must pay each month remains constant at 250 euro.