Amortization With Dates – 12 Payment & 15 Compounding Options

How many realistic payment schedules with dates can you think of? I came up with 12. Now, regardless of the payment cycle, how many compound interest methods can be applied to the 12 payment cycles? I came up with 15. This amortization schedule therefore has 180 (12 x 15) combinations of payment and compounding methods. Most people will only come across the need for one or two combinations, but you never know.

Why would anyone need a compounding rate that differs from the payment cycle? An example might be if a borrower has an investment that pays out once each quarter and wants a loan to match their cash flows, rather than making monthly payments. The annualized rate on a 6% loan compounded quarterly is 6.1363%, while your normal monthly compounded 6% loan is an annual rate of 6.1678%.

Here is a list of payment and compounding options:

You do have to remember to make the first payment date on loans that pay Semi-Monthly (1st & 15th) either the first or 15th of the month, and likewise Semi-Monthly (15th & EOM) first payment dates must be the 15th or end of the month.

The trick to making the stated interest rate for a loan equivalent to a rate that compounds differently was explained in my previous post “When Cash Flows Don’t Match Compounding Periods“. The converted rate is used to calculate the payment and interest each period.

Keep in mind that I have been retired for many years and have not used this amortization in a real life situation, so no guarantees.


Don Pistulka

Retired Credit Union CFO - Finance
Background: over 40 years in investments, asset/Liability management, banking, securities trader.
Worked for: California Credit Union, WesCorp, CalFed S&L, Crocker Bank, Carroll McEntee, Federal Home Loan Bank Board (D.C.), Western Asset Management, Security Pacific National Bank.


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