Lenders use it to quote a fair settlement figure; borrowers use it to check statements or plan an early payoff. For informal loans, agreeing on the outstanding balance in writing is often the first step to resolving a repayment that has drifted off track.
How it is calculated
B = P × (1 + r)^k − M × ((1 + r)^k − 1) ÷ r
B is the outstanding balance right after payment number k.
P is the original loan amount.
r is the monthly interest rate as a decimal — the annual rate divided by 12.
k is the number of monthly payments already made.
M is the fixed monthly payment from the amortized loan formula.
Intuitively: the first term is what the debt would have grown to untouched, and the second term is what your payments, with their timing, have knocked off.
Example
Take a 100,000 THB loan at 12% per year (1% per month) over 24 months, with a payment of 4,707.35 THB. After 12 payments, B = 100,000 × (1.01)^12 − 4,707.35 × ((1.01)^12 − 1) ÷ 0.01 = 52,981.56 THB.
Notice the asymmetry: you have paid 12 × 4,707.35 = 56,488.17 THB, yet the debt fell by only 47,018.44 THB. The difference, 9,469.72 THB, was interest — which is why the halfway point of a loan's term is not the halfway point of the debt.
Understanding your result
The balance is the number to use in any settlement conversation. If the borrower wants to close the loan today, this figure — not the sum of remaining scheduled payments — is the fair payoff amount before any fees.
Put the agreed balance in writing. A short debt acknowledgment stating “as of this date, X THB remains outstanding” resets both sides to the same number and is invaluable if the history of payments is messy.
When the balance reaches zero, close the loop properly: issue a final payment confirmation so the borrower has proof the debt is finished.
Frequently asked questions
Why isn't my balance just the loan minus what I've paid?
Because each payment covers that month's interest first, and only the remainder reduces the debt. Early in the loan, interest takes a large share, so the balance falls slower than your total payments suggest. The formula accounts for that split automatically.
Is the outstanding balance the same as my early payoff amount?
It is the starting point. The mathematical balance is what you owe in principal today; some lenders add an early repayment fee or accrued interest for the current partial month. Check the agreement, then confirm the exact payoff figure in writing before transferring.
What if payments were irregular — some missed, some extra?
The formula assumes every scheduled payment was made on time. If reality differs, reconstruct the balance payment by payment: for each one, add the month's interest to the balance, then subtract what was actually paid. Bank records and chat history help fill the gaps.
How do I check this against my lender's statement?
Compute the balance for the same payment count and compare. Small differences of a few baht usually come from rounding or payment dates falling on different days. Large differences are worth querying — ask the lender for a payment-by-payment breakdown.
Does this work for interest-free loans?
Yes, and it becomes simple subtraction: with no interest, the balance is the original amount minus everything paid. Borrowing 60,000 THB and having paid 10 installments of 2,500 THB leaves 60,000 − 25,000 = 35,000 THB.
What should we do once we agree on the remaining balance?
Record it. Write a dated note or debt acknowledgment stating the agreed figure, signed by both parties, and attach an updated payment schedule for the rest. If the loan is being settled early, exchange the payoff against a final payment confirmation on the same day.
Results are estimates for general information only and may differ from a lender's exact figures. They are not financial or legal advice.