This is a brief tutorial that will show you have to use the HP 10bII financial calculator to amortize a loan.
First you will need to find answers to all of the following questions (bulleted below) except one of them, which is the one you will be solving for; in this case PMT – Monthly Payment. So if you have a loan for $9700 at 9.9% for five years and you would like to find out the monthly payment, then you can find it out easily using the HP 10bII calculator.
- N– Number of Payments
- 1/YR– Interest Rate
- PV– Present Value
- PMT– Payment
- FV– Future Value
For example: If you want to calculate the monthly payment for the above loan, then you will need to have all the other values (N, 1/YR, PV, and FV) to solve for PMT (Payment).
- N– 60 (this is the number of payments in months)
- 1/YR – 9.9 (this is the interest rate of the loan without the % symbol)
- PV – 9700 (this is the present value of the loan, in this case $9700 without the $ symbol)
- FV – 0 (this amount is almost always zero, unless it is a balloon mortgage)
- PMT – this field remains blank as this will be our answer
Now that you have your loan information, now it’s time to input the data into your HP calculator.
To do input the data into your calculator follow these steps:
- First clear your calculator memory by pressing the orange button and then pressing the C ALL button.
- Next let’s input the time of the loan in months, which is 60. Type 60 into the calculator and then press the N button.
- Now let’s input the interest rate 1/YR in to the calculator. Input 9.9 into the calculator and then press the 1/YR button.
- The present value is entered next, which is $9700 so input 9700 into the calculator and press the PV button.
- For the future value, it is usually zero unless there is a balloon payment and in this case there isn’t so enter 0 and press the FV button.
- Now we have solved the equation for 4 out of 5 of the variables except the monthly payment which is what we need. So to find out the monthly payment, just press the PMT button and you should get -205.62, which is your monthly payment amount.
If you would like to check your work or see the variables that are stored in the calculator you go now press any of the variable buttons and you will see the data you just entered.
- If you press the N button right now the calculator will say 60
- The 1/YR button it will say 9.9
- PV is 9700
- FV= 0
- PMT is going to be negative -205.62
Now let’s say that the payment is too high and you would like to extend the term of the loan to 120 months, it is very easy to do.
To do this just type 120 into your trusty calculator and press the N button and you have just extended the term to 10 years. Press the PMT button and you will see that the new payment for the 10 year term is $127.65.
Now let’s say that you want to have a payment of $150 per month even, which is also very easy to do.
This is the tricky part… before entering 150 into the calculator you will need to change it to a negative 150 before placing it into your HP. So, type -150 (to do this enter 150 and then press the +/- button) now press the PMT button. This will store the payment of $150 into your calculator so now you can see all the different variables stored in the calculator to arrive at your $150 monthly payment.
- If you press the N button you will find out that if you want to have a $150 monthly payment the loan term will need to be 92.80 months.
- Or if you pressed the 1/YR button you will see that the interest rate would need to be 13.90% to get your $150 payment.
Just remember you need to input at least 4/5 of the variables into the calculator and solve for the missing variable each time.
Also, don’t forget that the payment is going to be a negative number whenever you change it.