This loan interest calculator estimates the total interest paid on your loan by taking account of a hypothetical minimum monthly payment and of a maximum one. There is in depth information on how to choose an optimal borrowing plan below the form.

Loan amount/balance:*
\$
Minimum monthly payment:*
\$
Maximum monthly payment:*
\$
Annual Interest rate:*
%

## How does this loan interest calculator work?

This loan comparison tool allows you compare two different payment plans that take into consideration a desired minimum monthly payment and a maximum one. The objective is to get an image on how a higher level of regular payment can result in attractive savings in interest over a certain period of time.

Apart from the two different levels of the amount that can be paid on a monthly basis, the user should provide as well the principal owed and the assumed interest rate.

In case of both scenarios the algorithm to estimate the relevant figures is the one explained below:

• Total interest paid “A” is estimate in two steps:

- 1st step:

nper = log((pmt * (-1) * (1 + rate * 0) / rate - 0) / (pv + pmt * (-1) * (1 + rate * 0) / rate)) / log(1 + rate)

Where:

pmt is either the Min. or the Max. desired payment

rate is the Annual interest rate/1200

pv  is the Loan amount/balance

- 2nd step:

A = (nper * pmt) - pv

• Average monthly interest paid “B”:

B = (A - pv)/nper

• Total paid for the loan “C”:

C = nper * pmt

• Number of monthly payments “D” = nper

## Example of a calculation result

In case of a \$100,000 loan with an interest rate of 5%, if we try to compare two desired payment levels: one of \$1,000 and another of \$1,300, this tool will display the following results:

 Payment details Minimum monthly payment Maximum monthly payment Total interest paid \$29,628.47 \$20,813.07 Average monthly interest paid \$228.56 \$223.96 Total paid for the loan \$129,628.47 \$120,813.07 Number of monthly payments 130 93 Estimated payoff date in 10 years and 10 months in 7 years and 9 months

As it can easily be observed from the above table, the plan to repay a higher monthly payment is more attractive as the savings in interest are of \$8,815.4 while the estimated payoff date is 7 years and 9 months.

## Loan repayment plan comparison

There are further aspects we detail below that everyone in search for a loan repayment plan should take into consideration:

• Eligibility or the criteria to meet in order to take the loan. It may seem a nonsense but before deciding whether to refuse a less attractive offer you should first consider whether  you meet the criteria of the offer you are about to accept.

• Effective annual interest rate, the smaller is the better for the borrower. It has an impact on the regular payment and on the total paid back.

• Loan term which should be in accordance to the borrower’s needs. It is also recommended to be analyzed by taking account of the total interest paid and by the payment level to be made on a monthly basis.

• Applications costs and associated fees or commissions.

• The existence of any closing costs.

• The level of the upfront payment where applicable.

03 Dec, 2014 | 0 comments