In economics, Present value interest factor, also known by the acronym PVIF, is used in finance theory to refer to the output of a calculation, used to determine the monthly payment needed to repay a loan. The calculation involves a number of variables, which are set out in the following description of the calculation:
Formula
editLet:
- = the amount borrowed
- = the effective (ie convertible annually) annual interest rate charged
- = the number of years over which the loan will be outstanding
- = the annual amount of the fixed regular payments that will amortize (i.e. repay) the loan
- = the frequency of these regular payments, e.g. m = 2 means the payments are half-yearly.
Then:
A = W / PVIFA
where PVIFA = 1⁄m × (1−(1+i)^(−n))÷((1+i)^(1⁄m)−1)