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Development Of Periodic Loan Repayment Models Considering Rhythmic Skips

Author

Listed:
  • EROGLU, Abdullah

    (Faculty of Economics and Administrative Sciences, Süleyman Demirel Üniversity, Isparta, Turkey)

  • ERDAS, Mehmet Levent

    (Faculty of Serik Business Administrative, Akdeniz University, Antalya, Turkey)

Abstract

The notion of loan repayments rest on the principle that present value of sum of the instalments are equal to present value of the loan total. In a standard loan repayment plan, periodic instalments are set to a fixed amount. Besides, loan repayment plans with geometrically or arithmetically increasing periodic amounts can also be found at mathematics of finance textbooks. Beyond that models for loan repayments with skips deal with types of loans in that some periods are predetermined to pass by without making any instalment. Payment skips in some periods have been requested by some clients as expenses in some months rise considerably. In this study, general formulas are derived under the assumptions that periodic loan repayments adjust with arithmetic gradient series and interrupt with rhythmic non-payment periods. Later, by setting the arithmetic change to zero, a general formula for loan repayment with equal periodic instalments that also has rhythmic skips has been derived. Same numerical examples with solutions are presented for the developed models. As a result numerical examples have been used in order to show the validity of the models.

Suggested Citation

  • EROGLU, Abdullah & ERDAS, Mehmet Levent, 2018. "Development Of Periodic Loan Repayment Models Considering Rhythmic Skips," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 22(1), pages 6-19.
  • Handle: RePEc:vls:finstu:v:22:y:2018:i:1:p:6-19
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    References listed on IDEAS

    as
    1. Parvez, Mahbub, 2006. "Time Value Of Money: Application And Rationality- An Approach Using Differential Equations And Definite Integrals," MPRA Paper 10794, University Library of Munich, Germany.
    2. repec:taf:uteexx:v:61:y:2016:i:1:p:70-78 is not listed on IDEAS
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    More about this item

    Keywords

    Loan Amortization; Periodic Payments; Skip Periods; Rhythmic Skips;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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