Loan Calculator

How does this loan calculator work?

In order to help you figure out which will be the level of your regular payments plus all the other details this finance tool requires you to input values within the next fields:

• Loan amount which is the amount of money you would like to borrow either in case of a personal, student or car loan;

• Term meaning the period of time you agree with in order to pay back the principal plus the interest for the money you owe. This can be expressed either in years or months because the term varies by the loan type.

• Annual interest rate meaning the cost of money rate you expect to pay to the bank. Please note this is a fixed interest rate scenario that is why you have to assume an average over the years you are going to pay it off.

• Payment frequency for your loan meaning either a weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-annual or annual payment. This frequency has an impact to the interest paid.

• Assumed start date meaning the moment of the first repayment.

Further on, its algorithm that applies the standard compound interest formulas, displays the following details:

• Regular payment level;

• Total paid for the loan meaning principal + interest;

• Total interest paid;

• Loan term in months;

• Annual interest rate;

• Payment frequency;

• Estimated payoff date when you will be debt free.

This loan calculator might come in handy when trying to figure out which is the best plan on the market for any kind of loan like: car loan, student or personal loan. Its features make it a very flexible one as it allows different frequencies to repay and a term either in months or years.

Example of a result

In case of a loan of $10,000 taken for a term of 2 years, with an interest rate of 4.5% paid by monthly payments starting Dec, 2014 this application displays the following calculation results:

Loan Details:
■ Monthly payment: $436.48
■ Loan amount: $10,000.00
■ Total Paid: $10,475.47
■ Total Interest Paid: $475.47
■ Loan term: 24 months
■ Annual Interest rate: 4.50 %
■ Payment frequency: Monthly
■ Estimated payoff date: November, 2016

Interest rate on loans

In finance theory the interest rate is the percent of money you as a borrower pay to the creditor or the so called lender for the money you owe. It is practically the cost of the money and in case of loans it is added to the principal which means it capitalizes for the benefit of the lender.

Depending on the loan type or the financial product you choose the interest can be either fixed orfloating.

Fixed interest rate one is usually offered in case of loans with a short term to payoff, for instance in case of personal loans or car loans, or even in case of mortgages but only for a fixed number of years on the first years of course. While its main advantage for the costumer is that it is constant and there is no risk to rise, its main disadvantage is that usually it is higher than the variable interest rate. This is due to the fact that the lenders try to ensure they have a margin in case over time the rates on the market rise. Another disadvantage is that it is fixed and in case the average rates go down in the market your loan stays with it and you continue to pay a higher level than the market actually pays.

Floating interest rate is part of loans with a repayment schedule longer than few years, it is applied in all mortgages for instance. It is established by reference to the inter-bank interest rate, for instance within United States this is estimated by reference to the Fed rate, while in European Union it is linked to the Euribor rate. It changes with a regular basis for instance once in 3 months or once in 6 months.

Please take account of the fact that loan interest is usually expressed as interest rate compounded monthly (the so called APR), while the rate stated by bank institutions is an interest rate compounded annually (the so called APY).

How to deal with your loan?

Need to be financed for a personal acquisition, travel or study plan, or simply looking for a car loan or for a mortgage to buy your own house? Then such financial product may be a solution.  Please note that in finance there are quite a lot differences between what we call a loan and a mortgage, which we try to discuss below. Normally a loan has a payoff term no longer than 10 years, while a mortgage usually has a term varying between 25 – 30 years. Many loans, in many countries have fixed interest rates while in case of mortgages lenders cannot offer this interest type (as much, best they can offer a fixed rate for the first few years and then it starts floating). Another difference is that many loans compared to mortgages do not require a warranty because the value can be borrowed is significant smaller than in case of mortgage.

Most common products people take are:

• Personal loans;

• Credit card negative balance;

• Auto loans;

• Student loans.

Depending if the loan requires a warranty or not it can be classified as:

• Unsecured loan is the contract by which you simply agree with the terms and conditions to repay the debt while there is no warranty or guarantee required. The products with this characteristic are considered to be overdrafts and credit cards. In many cases to obtain even a personal unsecured loan you have to ensure you have an excellent credit score rating and a long term relationship with the bank you approach.

• Secured loan is the agreement that requires you put up some guarantee, which in many cases means you need to put up your property or assets in exchange of the money you borrow.

No matter of what you plan to do with the money you take, for personal or business use there are mainly two types of loans you can make which consider the method you choose to repay back your debt:

• Pay off your loan by fixed regular payments which are established by considering the amount borrowed, payment frequency, term to repay and interest rate and its compounding type. This is the most common approach when speaking about how people choose to deal with paying debts, as it is used in both mortgage case and in personal loans case.

• Pay back all in the end dwhich means the borrower agrees to pay the total (principal plus interest) by a onetime payment at the end of the term.