Loan Constant

Loan constant refers to an amortization number that represents the ratio of the loan amount and the equal payments required to pay the loan off. A lower loan constant number is desirable as it represents a lower amount of debt. This number is often used by investors who want to know the actual cost of a loan. The interest rate of a loan only calculates the premium due for borrowing money. The loan constant takes into consideration both the principal and the interest due on a loan. Lower amounts of debt mean less payment is going towards interest, and thus it is a better investment. Before financial calculators became common, loan constant tables helped property buyers compare loans for their debt service requirements. By using these tables, buyers could figure out the approximate amount of their monthly payment.