How to Calculate Loan Payments (PRICE and SAC): Complete Guide

How to Calculate Loan Payments (PRICE and SAC): Complete Guide

Before financing a car, motorcycle, home, or any other major purchase, understanding how loan payments are calculated can help you make better financial decisions and avoid unexpected costs.

The two most common amortization systems used by financial institutions are the PRICE system and the SAC (Constant Amortization System). Although both finance the same amount, they calculate monthly payments differently.

In this guide, you will learn how each system works, what affects your monthly payment, and how to compare different financing scenarios before committing to a loan.

What affects your monthly payment?

Several factors determine the amount you will pay each month.

• Loan amount.
• Down payment.
• Interest rate.
• Loan term.
• Amortization system.

In general, longer repayment periods and higher interest rates increase the total amount paid over the life of the loan.

How does the PRICE system work?

With the PRICE system, monthly payments remain almost the same throughout the loan.

During the first payments, a larger portion goes toward interest. As time passes, the interest decreases while the principal repayment gradually increases.

This system is popular among borrowers who prefer predictable monthly payments.

How does the SAC system work?

The SAC (Constant Amortization System) keeps the principal repayment constant throughout the financing period.

Since interest is calculated on the remaining loan balance, monthly payments start higher and gradually decrease over time.

Under the same financing conditions, the SAC system often results in a lower total interest cost than the PRICE system.

Example financing scenario

Information	Value
Loan amount	$50,000
Interest rate	1% per month
Loan term	60 months

In this example:

• The PRICE system keeps payments nearly constant.
• The SAC system starts with higher payments that gradually decrease over time.

How can you compare both systems?

The best approach is to simulate the exact same financing conditions using both amortization methods.

This allows you to compare:

• Monthly payments.
• Total interest paid.
• Total financing cost.
• Outstanding loan balance.
• Complete amortization schedule.

Which one is better: PRICE or SAC?

The answer depends on your financial goals.

• If you prefer stable monthly payments, the PRICE system may be a better option.
• If your goal is to reduce total interest paid, the SAC system is often more advantageous.

Comparing both systems before accepting a financing offer is one of the smartest financial decisions you can make.

Tips before applying for financing

• Compare offers from multiple lenders.
• Run simulations using different interest rates.
• Evaluate the total financing cost instead of focusing only on the monthly payment.
• Understand how the repayment period affects total interest.
• Avoid committing too much of your monthly income to loan payments.

Frequently Asked Questions

Which system has lower initial payments?

The PRICE system generally offers lower initial monthly payments than the SAC system.

Which system usually costs less overall?

In many situations, the SAC system results in lower total interest, although the final cost depends on the financing conditions.

Can I compare both systems before signing a loan agreement?

Yes. Running financing simulations is the easiest way to determine which amortization method best fits your financial situation.

Conclusion

Understanding how loan payments are calculated helps you compare financing options and choose the repayment method that best matches your financial goals.

The Loan Simulator, developed by and available exclusively for Android, allows you to calculate financing using both the PRICE and SAC systems, compare different scenarios, view complete amortization schedules, generate PDF reports, and save your simulations for future reference. The app performs mathematical calculations only and does not provide loans or credit approval.