A loan calculator can be handy to figure out if a loan is right for you. It can help you work out if you can afford the loan you want or if it’s out of your budget. Most lenders offer loan calculators on their websites, and you can use them easily.
Loan calculators help you know what to expect when applying for a loan. These are great tools to help you compare and shop around. You really don’t want to get the maths wrong when it comes to a loan!
What Is a Loan Calculator?
Loan calculators are automated tools that allow you to see how much interest you would pay on loans and how much your monthly repayment would be. Most companies that offer loans have loan calculators on their websites to give you an idea of the cost of the loan. This generally includes any fees and the interest rate charged based on how much you want to borrow. l The calculators will give you an indicative cost for weekly, fortnightly, and monthly repayments which you can select based on your pay cycle.
You can use these calculators for different loans like personal loans or car loans. Applying for a loan can be much easier when using a loan calculator first. Knowing what you want to pay and how much you can be approved for can save you time.
How Do You Use One?
Using a loan calculator is easy; it just takes a few simple steps, and you’ll get your estimated payments and interest.
- Input the loan amount you’re looking to take out.
- Add how many months your loan will last.
- Choose when you want to make repayments (monthly, weekly, or fortnightly).
- Lastly, add your credit rating. This can be a score or a general term like excellent, good, or needs work.
Once you’ve added all your information, you can see what your loan will cost you monthly. Loan calculators are great because they can help you decide how much you can take out and how long you would like to pay it back.
Having this information before applying for a loan is helpful. The last thing you want is to be surprised by the monthly repayment or interest amount.
After using a loan calculator, you might have questions on why you got the results you did. Let’s go over a couple:
- Why is my interest rate so high?
Calculating your interest rate depends on two factors: your credit rating and whether the loan is secured or unsecured. This means if you have a high credit rating, your interest will be lower because you’re less of a risk to the lender. If the loan is unsecured, the interest is likely higher because the lender doesn’t have collateral as a secure loan has.
- Why is my monthly repayment so high?
The monthly payment is calculated by the amount of the loan plus the amount of interest you’ll pay divided by the number of months you set your loan period at. So if you want to pay off your loan sooner, you pay less interest, but the monthly repayment will be higher. If you want to take longer to pay off your loan, your repayments won’t be as costly.
If you think your repayment amount or your interest rate is too high, try working on your credit score or contacting the lender to see if you can extend the loan period.
Is It Worth Using a Loan Calculator?
If you want to apply for a loan but don’t know where to start, loan calculators are an excellent first step. They give you the numbers you need to know to apply for loans confidently. Using a loan calculator has several benefits and no downsides!
Loan calculators help you know where to start when preparing your finances for a loan. They use your credit rating, but unlike when you’re applying for a loan, it won’t negatively impact it. Finding out how much your monthly repayments will be in advance can help you avoid defaulting on payments and lowering your credit rating.
Final Thoughts
Using a loan calculator is one of the easiest things you can do to help prepare for a loan, and it’s free! Knowing how much your repayments and interest amount will be can set you ahead financially before actually taking out the loan. You will learn how to divide your finances before fully committing to a loan.
Using a loan calculator will not negatively impact your credit and can help show you if you should work on your credit before you apply. Loans can be confusing, especially if you don’t know what you want or how much you can expect to pay.
Lenders like Credit24 provide free loan calculators to use before applying for loans; if you’d like more information on loan calculators or how to apply for a personal loan, contact Credit24.
Disclaimer:
IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit License 422839. Lending criteria, fees and charges apply.
