Calculate the Terms and Payments of Your Loan

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Tip: Calculate your fixed rate loan yourself. With this simple tutorial, you can make a personal loan calculator in excel. 

Loan calculators are a great resource to plan borrowing. They're easy to find on the Internet and simple to use, but you do have to understand certain ideas and terminology to make them work. 

Follow the steps and tips below to put a loan calculator to work for you.

How Much is Just Right?

Whatever your purpose, make sure you know how much money you need. Borrowing too little leaves you short of your goal, and too much can bust your budget. Assess your need and enter this figure into the calculator as "Loan Amount".

How Do You Rate?

It's important to understand the cost of your loan, expressed as the annual interest rate. You can estimate your rate by asking the lender you plan to use what they typically charge for the type of loan you want. You can also look online for current market rates. Regardless of the method, be certain you'll be able to borrow at the rate you enter as "Annual Interest Rate" in the calculator. To be safe, it's a good idea to use a slightly higher rate to provide a margin for error in your estimate.

Make Sure Time is on Your Side

Enter the length of your loan into the "Term" section of the calculator. Lenders allow different terms depending on loan type, so check with them or review internet resources to understand how long you'll likely be allowed to repay. Always consider shorter than allowable terms if they fit your budget. A shorter loan eliminates debt more quickly and saves significant money on interest.

The Payoff

With these three inputs, calculate your monthly payment by clicking "Submit" or "Calculate". In most cases the payment provided will be the monthly payment, though some calculators allow you to choose bi-weekly or annual payments.

You can change these variables as many times as you want to understand the impact of different loan amounts, rates and terms. More importantly, use the payments calculated to assess whether your budget can support the new loan. In addition, most lenders allow your total loan payments and housing expense to be no more than 40% of your gross (or "pre-tax") income, so smart planning with a loan calculator can help you understand if your loan is likely to be approved before you even sit down with the lender.


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