Loans are a handy financial product that you can rely on when you need a little help to achieve a specific goal or solve a current problem. Everyone can sometimes run out of money, so borrowing can be a lifesaver. You should do this only when necessary. Of course, you should borrow money only when you’re sure that you can make the repayments without any problems.
Getting a loan entails certain costs that borrowers are often unaware of. This is something you should ask about before you apply with a lender so that you can plan your budget and avoid financial difficulties. You can check out and find a handy tool that can help you calculate loan costs.
What Is a Loan Calculator?
Most lenders today operate online, which makes the procedure of applying for and obtaining a loan much easier for borrowers. On their websites, you can find all lending terms and details about the financial arrangements they offer. These are the amount you can borrow, the interest rate, the tenure, and all the fees involved in processing your application upon approval.
These details are of great importance because they enable you to calculate how much borrowing money will cost you, how much monthly installment you can afford, and for what period. This is of great help when you need to compare different financial arrangements and compare them apple to apple.
However, if you were to carry out this calculation on your own, there is a big chance you would get confused and do something wrong. Although it is possible to compute the loan costs manually, it’s a complex calculation that would probably take a lot of time. Luckily, there’s a shortcut, which is online loan calculators.
These handy tools are fairly simple calculating apps that do a great job. Based on the given parameters, in just a few clicks, you can find out how much it will cost you to borrow money from a certain lender. When you compare several offers, you can easily find the one that suits you best.
Minimize Costly Mistakes
The first and certainly the most important advantage of using the loan calculator is that the cost calculation is quite accurate. It’s more precise than the calculations you do on your own because the algorithms used by this tool perform complex math operations in just a few seconds. You would probably need a lot of time but also advanced math knowledge to do all that manually.
The trickiest part of this calculation can be the interest rate. Its type can affect the overall loan cost. It’s not the same thing when you pay the same installments during loan life (fixed rate) and when these changes whenever the APR changes (variable rate arrangements). The first ones are much easier to calculate, while the latter can be tricky.
Ease of Use
Lenders are constantly finding ways to attract new clients, and the possibility of using the handy loan calculator is one of them. By putting these apps on their websites, lending providers give borrowers the chance to find the best deals on their own and work within their budget. They can do that in just a few clicks and thus save a lot of time.
To use the loan calculator, you need to know several basic data related to the financial arrangement you think about. These are the amount, interest, repayment period, and lender’s fees. There are also slightly more complex calculators where you can enter information about yourself, such as your credit score, the amount of your income, and the like. This can certainly give an even more accurate calculation if you bear in mind that the interest rate depends a lot on your creditworthiness.
Know Whether You’re Eligible
Lenders have criteria that borrowers must meet for their application to be considered at all. These may differ, but there is a general set of requirements, like credit score, income, DTI, etc. Knowing them will help you apply exclusively for loans with a high chance of approval. Otherwise, multiple applications in a short time can bring you more harm than good, as these hard inquiries lower your credit score.
Using the calculator can save you a lot of time because you won’t have to fill out numerous applications at different lenders. You can also use this tool to check which parameters you can adjust to be eligible for a loan. You may have to borrow less money than you wanted or agree to a shorter repayment term. In any case, it’s a much better deal than applying for loans and being rejected.
Great for Financial Planning
If you plan to take out a loan, you shouldn’t make that decision in a rush. On the contrary, you need to think carefully and have a really good reason to get into this debt. On top of all that, you have to stay on top of your current payments and financial situation.
Borrowing money without a good plan that will allow you to pay installments regularly can be very problematic. Of course, you return the amount you borrowed plus interest, and that’s information you know from the very beginning. But you also need to factor in other costs and situations that can affect the repayment schedule.
When looking for a suitable loan, you tend to choose the lowest possible interest rate. Depending on your credit score, lenders may or may not approve it. If your rating is good, you certainly have a chance to negotiate better lending terms. If not, lenders will offer you lending terms based on the assessed risk of you as a borrower. In each of these cases, using a loan calculator can give you good guidelines for planning expenses.
Using a loan calculator before deciding on where and how much money to borrow can spare you a lot of hassle. It’s a tool that makes the most accurate cost estimate of borrowing money and helps you find the best solution.