I use APRWIN as a double check against our software. For the life of me I can never get the APR to come out correctly on 6 month interest only loans. What am I missing? Has anyone else had this problem?

Thanks

We've had the same problem for interest only payments with a longer term.

It would seem to me that if you calculated based on a single payment due at maturity it should be the same as APRWIN because the principal is not being reduced. Right?

Post a set of numbers and dates & I'll take a whack at it.

Note date 9/27
Monthly interest payments starting Nov 2 for 6 month
Amount financed 160,114.00
Finance charge 6,583.91


Is that everything?

How much are the monthly payments? What is your stated APR?

APR 8.223

What's your note rate, and loan amount? We need that to calculate the monthly interest payments?

Sorry,
loan amount 160,218.00
note rate 8.00
monthly interest payments of 1,075.24

I'm getting 7.994 APR ????

Thanks again

Based on what you provided:

AF = 160,114
APR = 8.223
FC = 6583.91
5 Pmts @ 1075.24
1 Pmt @ 161293.24

I got an APR of 7.9601
APR overstated by .2629
FC overstated by 28.47

I assumed not secured by real estate.

Did your payment stream show a fixed pmt of 1075.24 or did it show payments ranging from X to X?

Fixed payment.

I'm so confused!!! I did go back in and re entered the info and I did get a 7.9601 APR this time. So does this mean that we are overstating the APR on all of our short term interest only loans? How is that possible when our software figures it out for us?

I can't answer that, you need to be talking to you software vendor and pulling a larger sample of these loan types to check. Our software, for monthly interest only payments, will show a payment from X to X. I have had no problem in reconciling the APR. There is also the possibility you are not entering something into your software correctly.

Ok, thanks Dan. Have a good weekend.

ok, I just finished reading a bunch of similar threads and I think my issue is with the accrual method?????? Is this a posibility? On APRWIN it only lets you input your accrual method for construction loans, so how is it figuring regular APRs?

You need to look at your numbers again. Difference you have between Note & Amt. Financed is $104. Five odd days interest on $160,218 at 8% would be $175.58. So I assumed the odd days were not collected up front as prepaids, but rather you had a long first payment. Interest on $160,218 at 8% for 187 days is $6,566.74 and if there were $104 in PPFCs the total FC should be $6,670.74 - right? Not $6,583.91. Also 6 payments of $1,075.24 = $6,451.44. This is why the calculated APR is lower than the note rate.