How to Calculate Quarterly Payments

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Whether you are making payments on your home, car or business, depending on the lender, loans are repaid in biweekly, monthly, bimonthly or quarterly payments. In other instances, such as tax payments, quarterly payments are usually made on commercial loans such as a loan from a bank. Upon agreeing to lend you the money, the lender draws up a contact stating the terms of the contract. If your payments will be quarterly, follow these steps to determine the amount.

Determine the loan amount. Your loan amount is also referred to as your principal. Example: If the bank lends you $10,000 to start a business, your principal is $10,000.

Know the term of the loan. The term of the loan is the period of time in which the loan will be in force. Example: If the bank requires you to repay the entire loan within five years, the term of your loan is five years.

Get the interest amount, if applicable. Automobile, home or business loans generally have interest attached. Typically, these loans are amortized—the interest rate is included in your periodic installments over the loan term. Example: If your total interest rate is 7 percent of a $10,000 loan, your total interest amount is $700, which will be added to your periodic payment amount.

When calculating your interest amount, separate the annual interest from the total interest, if necessary. Example: If the annual interest on a $10,000 loan is 7 percent and the term of the loan is five years, your total interest amount will be $700 x 5 = $3,500.

Add your interest rate to your principal then divide the total by four. Example: Your principal is $10,000 and your total interest is $700, calculate as follows to arrive at your quarterly payments:

$10,000 + $700 = $10,700 / 4 = $2,675 = quarterly payments.

Note that you will be making four payments each year because quarterly payments occur every three months. Since there are 12 months in a calendar year, you would divide three months into 12 months to arrive at four months, which is the frequency of your quarterly payments.

Tips

  • The calculation for determining your quarterly payments is generally always the same, even if your quarterly payments are not based on a loan (e.g. tax payments). Always divide the amount you owe by four to arrive at your payment amount.

References

About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.

Photo Credits

  • Siri Stafford/Digital Vision/Getty Images