The situation
A workshop owner makes the same loan payment every month. After the first payment, the statement shows that the amount owed fell by less than the amount taken from his bank account.
He wants a simple schedule he can check against the lender’s statement before updating next month’s cash plan.
- Starting debt
- ₹100,000
- Monthly interest rate
- 1%
- Monthly payment
- ₹6,000
Full data and assumptions
A workshop owes ₹100,000 at 1% monthly interest and pays ₹6,000 at the end of each month. Ignore fees and round nothing until the end.
Your task
What does the workshop owe after two payments?
Reveal step-by-step solution
Set up the problem
Month one interest is ₹1,000. Principal repaid is ₹5,000 and closing balance is ₹95,000.
Work through the numbers
Month two interest is ₹950. Principal repaid is ₹5,050, so closing balance is ₹89,950.
Interpret the result
Of the ₹12,000 paid, ₹1,950 went to interest and ₹10,050 reduced debt.
What to remember
Calculate interest on opening principal and carry closing principal into the next row.