Question

If you borrow $100,000 at 6.5% APR, how many years will it take to pay off the loan if you pay $800 per month?

Answer 1

Excel can be used to solve this. The function to be used is =NPER

=NPER(rate,pmt,pv,fv)

We will convert everything to monthly terms.

APR is the nominal interest rate per year. Monthly interest rate will be 6.5/12 or 0.5416667%

Here, rate is 0.005416667

PMT is the periodic payments which is 800

Pv os the present value of loan amount which is -100,000. Negative sign is used as cash flow signs are opposite of payment and loan.

FV is future value which is zero as loan will be completely paid.

=NPER(0.005416667,800,-100000,0)

=209.2467 months

Thus number of years required = 209.2467/12 = 17.437225 years

Thus, it will take 17.4 years to repay.

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