What is a payment factor?

A payment factor is an industry-standard value you can use to calculate a loan’s monthly payment quickly. Financiers typically include payment factors on their rate sheets (or can provide them upon request).

Payment factors are unique to each loan term (tenor) and APR. For example, a 20-year loan at 2.99% will have a different payment factor than a 25-year loan at 1.99% or a 25-year loan at 2.99%.

Why use payment factors?

Payment factors simplify monthly payment calculations into one number. This reduces the need to manually account for loan characteristics such as payment deferrals, interest accumulation, or interest structure.

What does the payment factor mean and how do I use it?

Put simply:

Payment factor = Monthly payment / Total loan amount

To calculate the payment factor, divide one month’s payment by the total loan amount.

To calculate the monthly payment using a payment factor:

Monthly payment = Payment factor * Total loan amount

Where do you find payment factors?

You can find payment factors in a few ways:

• Check the rate card: This is the rate sheet your financier provides, typically organized by term and interest rate.

• Ask your financier: You can request payment factors directly.

• Use a financier loan calculator: Many financiers provide online calculators. Select the loan product, enter a sample loan amount, and note the monthly payment. Then calculate:

  Payment factor = Monthly payment / Total loan amount

How do you use payment factors in Solargraf?

When setting up a loan, after you select the general loan information, set the Rate Type to Payment Factor %.

Note: In Solargraf, the payment factor is entered as a percentage, so you need to multiply the payment factor by 100 before entering it.

Payment factor entered in Solargraf = (Monthly payment / Total loan amount) * 100