📅Monthly Repayment Terminology

Peer Protocol’s Method

Peer Protocol utilize the loan amortization method to calculate all interest and principal payment. The loan is amortized daily, but the payment should be done every 20th day of the month.

Annual percentage rate (APR) refers to the yearly interest generated by a sum charged to borrowers or paid to investors. APR is expressed as a percentage that represents the actual annual cost of funds over the term of a loan or income earned on an investment. This includes any fees or additional costs associated with the transaction but does not consider compounding.

As we calculate the APR for each day in a year (while taking into account of leap year), the APR are being divided by 365 days

$$APR_{daily} = APR/365$$

Where:

APRdaily = Daily Annual Percentage Rate

APR = Annual Percentage Rate

Daily Amortize Repayment Amount

Daily Repayment Calculation

This formula is to get the daily payment, where the total of the daily payment for the month will be paid on the 20th day of the month.

$$Payment_{daily} = Balance_{opening}*\dfrac{r(1+r)^n}{(1+r)^n-1}$$

$$Payment_{daily} = Balance_{open}*\dfrac{APR_{daily}(1+APR_{daily})^n}{(1+APR_{daily})^n-1}$$

Where:

Payment Daily = Daily Payment

Balance Beginning = Daily Opening Balance of the Loan

r = Daily Annual Percentage Rate

n = Total number of payments Left (period)

Monthly Sum Repayment

To obtain the monthly sum of repayment, the formula is:

$$Payment_{monthly} = \sum_{1\le i\le n}Payment_i$$

Where:

i = Days between day 1 of the period to the 20th day of the following month

Payment i = Daily payment for each day

The sum of the Payment would be the total sum of money that the borrower has to pay on the 20th day of the month.

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Example

Let’s say Aldo is looking for a loan, with the following term:

1. Loan Amount: USDT 1,000,000

2. APR Offered: 8%

3. Loan Period: 2 Years

4. The Loan is offered on: 1st Jan 20x1

5. Repayment Schedule (part)

   1. On 20th Mar 20x1: USDT 25,319.58 (Fee Paid: USDT 216.54)

   2. On 20th Apr 20x1: USDT 39,465.32 (Fee Paid: USDT 324.64)

   3. On 20th May 20x1: USDT 38,448.38 (Fee Paid: USDT 301.37)

Schedule Payment