WEB-BASED LEARNING OBJECT FOR COMPARATIVE LOAN CALCULATIONS

Students enrolled in economical subjects require, among others, a thorough understanding of mortgage financing fundamentals and techniques that will enable the student to handle complex mortgage problems. Unfortunately, the mathematical background of these students is usually not as high as in other technical disciplines. Since students face difficulties in some topics of finance like loan calculations, it is desirable to provide them practical examples and tools while studying. To this end mortgage calculators are a good choice. A rich variety of mortgage calculation tools are freely available through Internet. However, most of them have not been developed from a pedagogical viewpoint. In this case, a very flexible tool is needed to assist professors and students in the learning of this subject. In this paper, a web-based learning object has been developed to provide graphical results of loan calculations as a function of different variables. Basically, this loan calculator can be used to find out the monthly payment and cost of borrowing for a fixed-rate loan but also considering an annual interest variation. The calculator gets as inputs the loan amount (principal), the loan term, the annual interest rate, and the annual interest variation. The comparative results are obtained graphically by choosing one of the following options: interest paid, principal paid, monthly payment or remaining balance. Furthermore, it is also possible to compare results from the French and the German methods, and mostly determine if a longer term makes sense. The feedback has been so positive that students encouraged us to develop additional digital learning objects related to other financial concepts.