A guide to using free loan calculators

After entering the determinants, a loan rates calculator enables the user to work out the cost of borrowing. You may feel that the loans APR is the most important factor, but few people appreciate the significance of the term. Entering a few simple variations will enable you to calculate the optimal amount you should borrow and over how long.

Why use a free loan calculator?

Reasons to use an online loan calculator
It can be difficult to mentally calculate how much cumulative interest you'll pay over the life of a loan. However, most people choose to calculate loan repayments each month so they can be sure that they can sustain the monthly payments for the duration. Loan repayments vary considerably, depending upon the amount you borrow, the APR and duration. The secret to achieving a balance between interest minimisation and affordability is striking the right balance. You need to enter a few different combinations.

How to use free loan calculators

Amount that you wish to borrow
You need to enter the principal. You may want to buy a specific auto but, depending upon your credit profile and affordability, you'll need to decide whether you can afford to go ahead. You can easily change this figure. Depending upon your credit limit, you may choose to refinance your home, consolidate debt or buy a new car or all three. Rate of interest on the loan
The APR will be determined by the size of the loan relative to your credit profile. Smaller loans are normally more expensive to administrate, so they'll cost you a bit extra. Always enter different principals because borrowing just a few dollars extra could help you to reduce the interest rate that you'll pay on your loan. Charges and fees
Is there a cost for setting up the loan? If there is, you'll need to add this to the principal and spread this cost over the repayment term. You may pay fees if you have bad credit or are using a mortgage broker to help refinance your home. Duration of the loan
Extending the period of repayment helps to reduce the monthly repayment schedule, but it ultimately increases the cumulative interest that you'll repay on the debt. Calculate payments to achieve affordability because that's your priority. However, there's nothing to stop you from tweaking the figures to minimise the amount of debt that you'll accrue.