The purpose of the loan constant tables (sometimes referred to as debt constant tables or mortgage constant tables) is to make it possible to calculate loan payments and outstanding loan balances without the use of a financial calculator.
Full details of the use of the loan constant can be found in our How to Calculate a Debt Constant tutorial.
The loan constant formula is:
Loan constant = i / (1 - 1 / (1 + i)n)
Loan constant tables are used to provide a solution to the formula for any value of interest rate (i) and loan term (n).
The interest rate must be constant throughout the term of the loan and must be for the length of one period.
Loan Constant – Table Payment Example
What is the constant periodic payment needed to clear a loan of 250,000, if payments are made at the end of each year for 20 years, and the interest rate is 6%.
PV = loan = 250,000 n = 20 years i = 6% Payment = Loan x Loan constant From the tables at 20 years and 6% the loan constant is 8.7185% Payment = 250,000 x 8.7185% Payment = 21,796 per year
The loan constant factor of 8.7185%, is found using the tables by looking along the row for n = 20, until reaching the column for i = 6%, as shown in the preview below.
Loan Constant Table Outstanding Balance Example
For the loan above, what is the outstanding balance at the end of year 6?
The outstanding balance is given by the ratio of the loan constants for 20 years and 14 years, further details of this calculation can be seen in our how to calculate a debt constant tutorial.
PV = loan = 250,000 n = 20 years loan term m = 14 years to go until the end of the loan i = 6% Outstanding balance = Loan x Loan constant (20,6%) / Loan constant (14,6%) From the tables for 20 years and 6% the loan constant is 8.7185%, and for 14 years and 6% is 10.7585% Balance = 250,000 x 8.7185%/10.7585% Balance = 250,000 x 81.038% Balance = 202,595
The balance at the end of year 6, with 14 years left to run will be 81.038% of the original balance or 202,295.
Loan Constant Tables Download
The loan constant table is available for download in PDF format by following the link below.
Loan constant tables are one of many time value of money tables, discover another at the links below.
Users use these loan constant tables at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a debt constant table that you might use when considering how to calculate loan repayments. It is purely illustrative of mortgage loan constant tables. This is not intended to reflect general standards or targets for any particular business, company or sector. If you do spot a mistake in these time value of money tables, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.