Gentian Gashi

13/01/2021

Fixed Loan Amortization

This presentation is part of the Course Project for the Coursera Developing Data Products class. The peer assessed assignment has two parts. First, we need to create a Shiny application and deploy it on Rstudio's servers. Second, we should use Slidify or Rstudio Presenter to prepare a reproducible pitch presentation about the application. This presentation adresses the second part of the course project.

The app developed for the first part of the assignment is avalilable at: (https://gentiang.shinyapps.io/fixedpaymentamortizer//)

Source code for ui.R and server.R files are available on (https://github.com/gentiang/Assignment_Three_Shiny_Product)

This project aims to show how to calculate loan amortization. This project constructs a calculator for you to schedule out a fixed-rate loan into equal payments.

It contains three main “pages”. The first one shows a summary of how a loan amortizes based on selected parameters. The second one shows a plot of how the loan amortizes based on selected parameters. The third one serves as a table to show different values for different selections of amortizations.

An amortizing loan is a type of debt that requires regular monthly payments. Each month, a portion of the payment goes toward the loan's principal and part of it goes toward interest.

Also known as an installment loan, fully amortized loans have equal monthly payments. Partially amortized loans also have payment installments, but either at the beginning or at the end of the loan, a balloon payment is made.

Over time, the balance of an amortized loan decreases. A borrower can monitor the progress of paying off his or her loan's balance by using an amortization schedule.

An amortization schedule is also a helpful visual representation that depicts exactly how much of each month's payment goes toward interest and how much is applied to principal reduction.

Before any regular monthly payment is applied to reducing the loan's principal, the borrower must first pay a portion of the interest owed on the loan.

To calculate the amount of interest owed, the lender will take the current loan balance and multiple it by the applicable interest rate. Then, the lender subtracts the amount of interest owed from the monthly payment to determine how much of the payment goes toward principal.