How to Calculate the Real Price of Your Loan?

If your personal funds are tight and you are planning to take out a personal loan, you need to understand that you will have to repay much more than the initial sum. The crediting institutions and local banks want to earn some interest on each loan they issue. So, borrowers will need to repay a larger amount together with the interest rates and any additional fees. The total cost of borrowing can be rather expensive. Keep on reading to find out how to calculate the real price of your loan before you sign the contract.

How Does a Personal Loan Work?

You may find yourself in a tedious financial situation when you urgently need some cash. If you can’t wait until you improve your earning potential or you don’t have enough savings on your account, getting a small loan on Fit My Money may sound reasonable. But you need to realize that the initial sum you take out won’t be the same sum you will need to pay off at the end of the repayment term.

Special online calculators are designed to help consumers calculate the total cost of their loans. If you don’t want to make mistakes you may also turn to the help of such calculators. The loan consists of several sums including the principal, the interest, and additional fees if they apply.

• Principal. This is the initial sum of money a borrower gets from the lender or a crediting institution.

• Interest. This is what the creditor charges the borrower to give them money. You may find the information about the APR on the company website which includes the interest rate and any costs that should be paid upfront. These may include origination fees. The interest rate for a personal loan is fixed which means it doesn’t change over the lifetime of your loan.

• Additional Fees. These extra charges may include late fees, origination fees, and other applicable fees.

If you want to work out the real cost of borrowing you need to take into consideration:

1. The sum you are about to borrow

2. The interest rates

3. The length of the repayment term

4. The frequency of payments (weekly, biweekly, monthly)

5. Additional fees

How to Calculate Monthly Payments

Depending on the type of lending solution you’ve taken out, the requirements of its repayment may differ. You may request a personal loan, a student loan, or a car loan. Each of these options may come with different rates and demands so the repayment process will vary. Here is what you need to take into account:

Personal Loan Calculator

This is a special online loan calculator designed for consumers who opt for a personal loan. It takes the client’s interest rate, principal amount, as well as repayment term and tells them the sum they need to pay each month over the stated period. You may utilize calculators on the website of your service provider, or choose a more in-depth version online if you need particular calculations.

Student Loan Calculator

Do you want to obtain a student loan to help you get higher education? A special student loan calculator may be beneficial and help you find out all the details concerning debt repayment. You insert the principal amount and the interest rate, while the calculator gives you the sum you will have to pay on a monthly basis. All the loan requirements and other terms may be included in the calculator to make the final sum more accurate.

Car Loan Calculator

This is a great option to try before you actually purchase a new auto. This calculator will give you the whole picture of how much you will need to pay each month. It will require you to mention the desired sum, the interest rate, the repayment term, and any other conditions including if the auto is used or new. All of these terms may influence the final result. Generally, the repayment terms of car loans are shorter than those of home equity loans or personal loans.

Home Equity Loan Calculator

Consider calculating the real cost of a home equity loan before you sign the agreement with the lender. You will need to enter the estimated value of your home, your current address, your credit rating, as well as estimated mortgage balance. Pay attention that the borrower’s credit history and score play an important role in loan approval so you may need to look for other solutions if your rating isn’t good enough.

Save Cash on Interest Payments

As you can see, interest payments are the biggest cost of requesting a loan. If you try to lower the interest you will need to pay less during the life of your loan. Here is what can help you lower these payments and save more funds:

• Get prequalified. You may benefit from getting prequalified without submitting the full application for a loan. In this case, the creditor won’t conduct a hard credit inquiry and you will be able to avoid the risk of getting rejected while still understanding what amount you can qualify for.

• Repay the Debt Earlier. Can you afford to make more than minimum monthly payments? Then you can end up repaying the whole debt faster provided that there are no prepayment charges from the creditor.

• Make Additional Payments. You have a certain monthly sum you need to pay to the lender. If you make additional payments to repay the principal of the loan, it will lower the total loan balance. As a result, the general interest rate of the loan will be reduced too.

In conclusion, you may benefit from using an online loan calculator to define the real cost of the loan you are going to take out. Calculate the total monthly payment so that you are prepared for the costs and know you can afford this debt. There are also some ways to save on interest payments and become financially free faster.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes