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A Quick Guide To Calculating Loan Payments
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When you have decided to opt for a loan, it always proves to be beneficial to calculate your loan payments and costs. This information will help you greatly to compare different loans and choose whichever suits your requirements the best. Moreover, you can also plan out a budget about your purchase which helps in the long run. There are various ways to calculate your loan payments, but the easiest among them is to use an online loan calculator. This method lets you avoid the silly mistakes you tend to make while calculating long formulas on a regular calculator. Here are some steps which will guide you through the process of using an online loan calculator to calculate your loan payments.
1. Select an Online Loan Calculator
The first step towards calculating your loan payments is to find out and choose an online calculator which matches your specific needs. Most calculators available online are simple calculators, which provide you with an entire table containing your payment schedule including remaining debt. If you opt for a loan with uncommon compounding intervals or payments, there are also calculators available to calculate payments for these types of loans. Alternatively, you can use a loan calculator created by yourself on Excel.
2. Enter the Loan Amount.
The total amount of money that you need to borrow is termed as the loan amount. The second step of your loan calculation process involves the entering of theamount in the calculator. Most calculators require this amount to be entered under the label ‘base amount’. In case of calculating payments for a partially paid loan, you need to enter the amount that remains to be paid.
3. Enter the Interest Rate
In this field you need to enter the numerical value of current annual interest rate specified by the lender in percentage form. While calculating your loan payment the calculator does not consider the compounding interval. The interest rate entered needs to be the nominal annual interest, irrespective of the fact as to how frequently the interest is calculated.
4. Enter the Loan Term
This stands for the duration of time you would require to pay off the loan. Fill this field with the duration of time mentioned on your loan conditions for calculating the minimum monthly payment required. In this regard keep the fact in mind that a shorter time span ensures higher monthly payment but lesser amount of money sent.
5. Enter the Start Date
This data must be entered to determine the exact date of finishing your loan payment.
6. Hit Calculate
Some loan calculators give you the monthly payment amount just after entering the start date. For other you have to hit the ‘calculate’ button to get a chart or graph indicating your payment schedule.
Author Bio :-Neha Sharma is a finance student who loves to write in her free time. She has spent considerable time researching on online loan calculators. She wishes to give advice on how to calculate your loan payments in this article.
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