![]() And since interest rates tend to be affected by inflation expectations and risk, borrowing rates are almost always higher than inflation on most forms of debt including student loans, car notes, and mortgages. In fact, if the interest rate on your loan is higher than the inflation rate, the present value of your payments will always be higher than the current account balance. In my opinion, this is really the best way to figure out your true liability, which can be very different from the current loan balance. At the end of the post, I went through a calculation to compute the present value of a stream of loan payments. I recently wrote about the math behind loan payments.
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