Loan Calculator
This Loan Calculator is easy to use for everyone. And gives immediate response to Loan calculations.
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About the Loan
When you take a loan or get something financed, do you ask your financer whether the interest rate he is giving you is a flat interest rate or a reducing interest rate? Do you know that a flat interest rate is more expensive for you? If your answer to these questions is no, this article is for you. After reading this article, you can make an informed decision and save yourself from loss. Although both of these interest rates are the same, their method of calculation is different, due to which there is a huge difference between your total amount and the total interest you pay. If I talk about a flat rate, then your interest amount on this loan remains from the time you take the loan until the loan is closed. That means what you pay has two components: one is interest and the other is principal, due to which your outstanding amount keeps reducing every month, but in the case of a flat rate, the interest charge is charged on the opening amount. On the other hand, if I talk about reducing the interest rate, then in this case the interest that you are paying every month keeps decreasing, and the reason behind it is that the reduced interest rate that is applied is applied to the outstanding amount and not to the opening amount for which you took the loan. In the case of a flat rate, this is one of the main reasons why flat rate interest becomes costly for you.
Loan formula
Now, the magic formula comes into play. It involves your loan amount, monthly interest rate, and the total number of payments. It looks like this
Flat Interest Rate
For better understanding, let us take an example: suppose we need $500000, which we need for 3. years, and the interest rate will be 12%. But how are we discussing this? This rate of 12% is a flat interest rate, so we want to know how much AMI we would have to pay according to this rate. I have already told you that in this case, the interest calculated is calculated on the total loan value; even though your loan is reducing every month, the interest not calculated on that will be your interest on the entire $500000. In this case, let’s calculate the interest. If we talk terms of years, how much interest would be charged in the first year? What is 12% of $500000, $60000? How much would be charged in the second and third years? Because, as I told you, the interest will always be the same, so $60000 for the first year, $60000 for the second year, and $60000 for the third year. If you add the total, it will come to $180000. The total interest of $180000 has to be paid within 3. years, so we have taken out the interest on the amount, of $180000. we have to repay that $500000, we, have to repay in the name of a loan and $180000 in the name of interest; if we total both, then the total comes to $680000, and we have to repay within 36 months, so how much will the EMI be? $680000 divided by 36 months, so your EMI will be Rs. 18888.89, Which you will have to pay.
Basics of Loans for Money Borrowers
Some loan basics for borrowers to know.
Secured vs. Unsecured Loans: A secured loan is like a safety net for lenders, where your collateral backs your loan. Unlike secured loans, unsecured loans remain in debt but come at a higher interest rate.
What is the interest rate?: This is the fee for borrowing money. When we borrow money from someone, he charges us some fee. This means that we have to pay some extra money in the amount borrowed.
Fixed vs. Variable Interest Rate: Fixed rates remain fixed, which gives us stability. The period in which we can pay back the borrowed money is fixed. Variable rates change, which affects our monthly payment. And we face difficulty in paying back the money we borrowed. When the interest rate increases.
What is the loan term?: This is how long you are prepared to pay for. That shorter term will come with higher monthly payments, but lower interest over the loan amount.
What is the compounding frequency?: It affects how interest grows.
Frequently Asked Questions (FAQ) Here
1. What is a Loan Calculator?
A loan calculator is one of those financial instruments that could aid you in finding out your monthly loan payments, interest paid in total, and payback total, considering variables like the period of the loan, rate of interest, and amount.
2. Why Should I Apply for a Loan Calculator?
Access to a loan calculator helps an individual understand the figures about what they will pay monthly and the actual expense of borrowing. The calculator is one of the most valued tools for effective budgeting and prevention of excessive borrowing.
3. How is my interest rate impacting my loan?
The interest rate then becomes a determinative factor of the monthly pay and the total amount payable during the term of a loan. In simple terms, high interest rates are usually associated with expensive monthly repayments as well as with more interest paid at a given moment in time.
4. Can I use a Loan Calculator for various kinds of loans?
Of course, you can use the loan calculator for such diverse loans as business, home, auto, student, and personal loans. For all sorts of loans, the calculation process is the same.
5. What is an EMI?
An EMI is an equated monthly installment that has to be repaid in equated proportions. It covers the interest and capital portions created to make the financial planning process much easier.
6. Does a longer loan period translate to lower payments per month?
Yes, normally, longer-term loans are cheaper because of monthly payments. It also means that, along the way in that loan, your interest payments will accrue even more.
7. How can I lower loan interest?
If you want to pay the least amount of interest on your loan, you can choose a lower interest rate loan, come up with a shorter loan period, or make bigger, more frequent payments.
8. Are there any additional fees involved in taking a loan?
Extra costs of loans will be plenty, say processing fees, prepayment penalties, late payment fines, or cost of insurance. The terms of the loan need to be properly scrutinized.
9. Are advance payments allowed on my loan?
Most lenders permit the prepayment of loans. However, before making any pre-payments it always makes sense to consult with the lender as some institutions do have a pre-payment penalty.
10. How Good is an Online Loan Calculator?
A loan calculator puts in the input parameters and comes up with correct estimates. However, in light of lender policies and market conditions prevailing at the time of final sanction of the loan, terms may differ slightly.
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