Recently, there was a FINPACK News article on the basic functions of the FINPACK Loan Calculator. This article goes in-depth on what the ‘Payment Frequency’ of the calculator means (i.e. the frequency of Annual payments, Monthly payments, etc.). Currently, the loan calculator payment frequency choices are Annual, Bi-monthly, Bi-weekly, Monthly, Quarterly, Semi-annual, Semi-monthly, and Weekly.
FINPACK Payment Frequencies
FINPACK uses the following logic behind the payment frequency calculations within the loan calculator tool.
- Annual – one payment a year. The payment distribution is a ‘1’ in the month designated as the payment date for each year of the loan.
- Bi-monthly – payments occurring every other month. For FINPACK purposes, the payments are every other month. The payment distribution is a ‘1’ every other month for the life of the loan, starting with the first payment date.
- Bi-weekly – payments occurring every other week. For FINPACK purposes, there is a continuous cycle of two payments every month for five straight months, then a month of 3 payments. (This is to ensure 26 payments for the year; the first payment month actually has an extra payment so as to ‘prime the pump’ for the loan). The payment distribution will appear as a ‘3’ in the first month, a ‘2’ for the next 4 months, then for every 6 months during the life of the loan, you will see a ‘3’ and five straight ‘2’s.
- Monthly – payments occurring once a month. The payment distribution is a ‘1’ in every month for the life of the loan.
- Quarterly – payments occurring every three months equaling four payments a year. The payment distribution is a ‘1’ in the first payment month and a ‘1’ every three months for the life of the loan.
- Semi-annual – payments occurring twice a year. The payment distribution is a ‘1 in the first payment month and a ‘1’ every 6 months for the life of the loan.
- Semi-monthly – payments occurring twice a month. The payment distribution is a ‘2’ in every month for the life of the loan.
- Weekly – payments occurring once a week. The payment distribution is a ‘5’ in the first payment month, then a continuous cycle of two months of ‘4’s and a month of ‘5’ for the life of the loan. Depending on when the loan started in the year, FINPACK ensures that the correct number of payments are made for a year shorter than 52 weeks.
