In economics, Present value interest factor, also known by the acronym PVIF, is used in finance theory to refer to the output of a calculation, used to determine the monthly payment needed to repay a loan. The calculation involves a number of variables, which are set out in the following description of the calculation:

Formula

Let:

W = the amount borrowed (loan)
i = the effective (i.e. convertible annually) annual interest rate charged
n = the number of years over which the loan will be outstanding
A = the annual amount of the fixed regular payments that will amortize (i.e. repay) the loan
m = the frequency of these regular payments, e.g. m = 2 means the payments are half-yearly.

Then:

A = \frac{W}{PVIF}

where

PVIF = \frac{1}{m} \cdot \frac{1-(1+i)^{-n}} {(1+i)^{1/m}-1}

In its simplest form,  PVIF  is calculated using the formula:

PVIF = (1 + r)^{-n}

where r is the discount rate (or interest rate) and n is the number of periods.

See also