Loan constant

[JDARNELL]

I have a few questions about loan constants. I have read investopedia for the definition.

Why would someone care about it?

How would someone use it?

 

[pb4uski]

Looks to me like a pretty useless metric to me. Why do you ask and what are you using it for?

 

[Jerry1]

Looks like something that could be used for budgeting, but my guess is that it's one of those things that regulators required so people know that they have to pay money back each year. Kind of like the "it's hot" label on Micky D's coffee.

 

[JDARNELL]

Looks to me like a pretty useless metric to me. Why do you ask and what are you using it for?

I am thinking about purchasing another home and when I was looking at rates and estimates I see it pop
Up on the disclosures. I can’t see how I would use it in decision making really this the reason for the questions.

 

[Texas Proud]

Did not know what it is so must be useless




But reading about it, it is an easy way to see which mortgage is cheaper... might come in handy when the loan size is different...

 

[kevdude]

As I recall, the loan/mortgage constant was used to determine your payment - it is based on the interest rate and loan term. Take the loan amount * the loan constant = your payment. It is a bit useless today with all the mortgage payment calculators or financial calculators available at our fingertips. Prior to the availability of these tools it was useful.

 

[Masquernom]

In the late 1980's I was taking a finance class at night, working on an MBA. In one of the finance problems, the professor asked us to go to a table in the back of the text book. He then proceeded to explain how to interpolate between two values in the table. At the top of the page was the fairly simple algebraic equation to get the exact answer. I asked if we couldn't just use the equation. He said no. I assumed finance majors didn't know algebra.