Multiple Loan Repayment Optimization
Channel: Matt Nelson, MBA
Date: 17/10/2012

Hello, I'm Matthew Nelson, MBA, and in this (my first) video, I demonstrate how to use the Solver program for Microsoft Excel to determine the optimal repayment schedule for multiple, unconsolidated loans. 

The model contains controls that verify the accuracy of the data by calculating the total interest paid in two different ways.

Incorporating a monthly budget and effective payroll tax rate, the model calculates the minimum required gross salary that is needed for the desired repayment period given monthly living expenses.

Using economic profit maximization techniques, I determine point estimates for marginal cost and marginal revenue to find out the economically optimal repayment period.
This model has in mind student loans, so I hope you find this useful and informative.

Some very useful, and sometimes arcane, Excel functions are used that are worth learning: OFFSET, MATCH, SLOPE, INTERCEPT, YEARFRAC, TODAY, ROUND, VLOOKUP, MAX, PMT, FV, NPER.

N.B. To change an APR to 365/360, divide the decimal interest rate by 360, add 1, and raise to the 30th power. Subtract 1, and you'll have an equivalent, daily compounding rate.

Don't forget to like, share, and comment. Thanks for watching! 

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