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TimeValue Software Blog

Daily Payments

By Martel Pellerin

Occasionally, we get a customer that has a unique situation where they have to do daily payments. Sometimes they are only during the business week and sometimes they are 7 days a week. This is a calculation that you can do in TValue but it takes a little bit of creativity to do it.

Using TValue, we are going to put a series of either 5 or 7 payments on consecutive days and we are going to use Weekly as our Compound Period or Computation Interval and then determine how many weeks we need to pay off the loan. In my experience, most of these loans are paid off in less than a year. If you don’t know how many weeks you will need, just try and overestimate and then we can adjust the payments based on the amortization schedule.

Why do we use Weekly compounding or computation intervals? Weekly will allow us to have a Monday payment for X amount of weeks and then a Tuesday payment. You do it again for each day for as many weeks as we need. For example, if you were doing a year’s worth of payments, you would put 52 in the Number for each line with Weekly being the Period.

To build the schedule, we will have Weekly for our Compound Period or Computation Interval. Input the Nominal Annual Rate, and then on Line 1 your Loan amount. You will put in Payments in consecutive days, i.e. May 1, May 2, May 3, May 4, and May 5 on Lines 2, 3, 4, 5 and 6. If you want to solve for the daily payment, you could put “U” for unknown on each payment line and TValue will figure out your daily payment or you can put the dollar amount. When you click Calculate, you will get a message from TValue that says “Your cash flow days are out of sequence” which is OK as TValue has to sort the cash flows chronologically to do the calculation. NOTE: If you have TValue 5, please save the file before you calculate as you can’t undo it if you do something wrong.

We mentioned that you might have to estimate the number of weeks and then adjust. If you do this, you might have over paid the loan. Go to the amortization schedule and if the balance becomes negative, you will have to delete any subsequent payments after that point. Just figure out the date the balance went negative, go back to the cash flow data, and delete any line after that date. Then go back to the amortization schedule and check the balance - you might need to adjust the final payment or make one more payment to fully amortize the loan.

You can definitely do daily payments in TValue but it may take a little more work than normal.