How to calculate loan payments

Fastino

3 août 2011

A loan is an advance amount of cash offered by the bank and is repayable in monthly instalments, which include interest charges until its maturity time period. There are different types of loans like mortgages and personal loans which can be taken by individuals and businesses to boost their inflow of cash. The loan repayments inclusive of the interest charges are calculated using a loan calculator for decision and budgeting purposes.

How to calculate loan payments

Free online calculator loans Loan payments are calculated using a free online calculator loans like mortgages calculator or online loan amortisation table. The information required before the calculations include the loan amount, deposit amount, loan interest rate, frequency of payment and the term life of the loan. A pay day loan This information depends on the type of loan like a pay day loan, where the repayment period is on the pay day. The information is punched onto the calculator to get the monthly interest charges, monthly repayment amount, time period of payments as well as the total amount to pay back the loan.

Types of loans

Finance loans are divided into short-term loans and long-term loans. Short-term loans have a maturity period of less than one year like pay day money loans and military loans, while long-term loans mature after more than one year like home loans, property loans and loans for a car.

Importance of calculating loan payments

Decision making purposes Loan payments results are used to ascertain how much to pay on monthly basis, interest charges, number of payments and the total amount due to clear off the debt. This information is important when comparing what type of loan to take like a fixed interest or flexible loan as well as the various loan amount visa vie interest charges on each, the maturity period and the total amount to pay off the debt.
Budgeting purposes The information is crucial for personal budgeting and allocating enough funds to the loan repayment monthly. It is also used to determine one’s affordability to take out a finance loan, to apply for an additional loan, apply for a new mortgage, what loan or mortgage deposit to pay or to increase monthly repayment mortgages in order to quickly clear off the debt.

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