What Are Loan Calculators And How Do They Work?

23 February, 2015

Loan calculators are now spread all over the Internet. They are used by all the banks out there as a way to ease the work when getting a loan. You will find it much easier and comfortable to calculate the loan you need from your own home, and they will have less work to do and less explanations to give when you go down the bank. However, even though the loan calculator sounds heavenly, it can be confusing, especially for those who are not experienced in using a computer or the Internet. How a loan calculator does work after all?

The purpose of loan calculator

A loan calculator will show you the approximate amount you can borrow from a certain bank, and also the monthly repayments you will be requested to make after getting the loan. You will also find out the total amount your repay to the bank, the amount of time in which you will have to give the money back, and some information about the interest rate. Find out more below:

What information do you need for a loan calculator?

When using a loan calculator, you will need to fill in three simple pieces of information:

  • The “projected loan amount” or how much money you actually need
  • One, two or more “prospective repayment terms” or how long it will take to repay the loan
  • One, two or more potential “interest rates”.

Based on the current market conditions, the credit profile that you have and the reason why you are taking the loan, you can choose from a variety of interest rates.

What do I do next?

After you filled in the necessary information, things become easier. The loan calculator will simply show you the “projected monthly loan payment”. Most of the loan calculators out there will let you introduce a number of combinations.

Can I introduce more combinations into a loan calculator?

When using a loan calculator, you can change the variables as many times as you want. The loan calculator will calculate the monthly payments as many times as you introduce a new combination. Therefore, you can simply create preferred types of loans before you actually go and talk with the bank.

Are all the loan calculators the same?

Loan calculators usually display the same information, but they can have different formats, due to the bank that released them. Some loan calculators can require or permit one additional number or more additional numbers.

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