What Is A Loan Calculator?
A loan can help you finance your travel, purchase your dream car, or fund your business venture.
However, with all the different lending companies in the Philippines that offer various loan interest rates for every type of budget, how can you choose the right monthly payment and payment period that work perfectly for you?
Luckily, there is a tool that aids loan borrowers in determining these factors in advance. It’s called a Loan Calculator.
What a Loan Calculator does
A Loan Calculator is a digital tool that guides loan borrowers in projecting their monthly amortization, interest rate, and payment period, among others.
Today, many financial comparison sites, such as eCompareMo, provide a Personal Loan Calculator and Housing Loan Calculator to guide people in getting the best loan deals that suits their payment capacity.
Advantages of using a loan calculator
Get a clear idea of the monthly payment, interest rate, and other fees
One of the best features of a Loan Calculator is that it can calculate loan payments, which includes your monthly amortization and interest rate based on the amount you input. For example, by inputting the loan amount and payment term, you instantly see the monthly amortization and interest rate.
Help the loan borrowers save money
Since a Loan Calculator helps you project the amount, such as monthly payment and interest rate, you can choose the term that works best for you. Save time, save money.
Provide all the necessary information that a loan borrower needs to know
Apart from the numbers, essential information about your loan is also provided by a Loan Calculator.
Here are some of the basic terms you might encounter when using a Loan Calculator.
- Loan type
You can choose the type of loan you are applying for, whether personal or for financing your home or vehicle. Some financial institutions provide calculators for different types of products.
- Loan amount
This refers to your loan amount. The amount you input affects your monthly installment and total loan payment. Make sure that you borrow the amount you afford to pay in the future.
Tenor refers to how long the borrower will repay the loan amount, which is stated through days, months, or years. The loan borrowers can input their desired payment term and see how much their estimated loan payment and interest rate will be.
- Effective interest rate
Effective interest rate refers to the amount that lending companies charge to borrowers for the use of the money. It is often represented as a percentage and cost to borrowers every year, which depends on the length of their payment. Furthermore, every time you change your loan amount and length of your payment term, your interest rate will change as well.
- Estimated monthly installment
The estimated monthly installment refers to the amount or premium that borrowers need to pay every month, which includes the loan principal and interest rate. Just like in the interest rate, the monthly amortization varies depending on your chosen loan amount, payment term, and interest rate.
- Estimated total loan payment
The estimated total loan payment refers to the overall cashout the loan borrowers need to pay, which consists of the loan principal and accumulated interest rate.
How to calculate monthly payments on a loan?
There are different calculations for every type of a loan. You need to identify first the type of loan you are applying for and your desired loan amount before you can calculate your monthly payment.
Using the Loan Calculator, enter your desired loan amount and interest rate. Next, choose a payment term then click the calculate. The calculator will automatically project the monthly payment based on the figures you select.
When borrowing money for whatever purpose, use a Loan Calculator to help you project your monthly amortization and make the most out of your money.