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Loan Calculator: Taking Control of Your Loan Repayments
Do you have plans to avail of a loan from a bank? But you might wonder about the amount, interest rate, the borrowing amount based on tenure. So you go in person and get to know the details from the bank. Though the calculation looks simple and clear after coming home, as you start to make your calculations, you get stuck in a pool of confusion and raise many questions about the exact monthly repayment on the loan.
Please do not be worried about it, we have this loan calculator just for you to help sort out all the difficulties, and we are here to give a clear perfect solution to claim a loan based on your expected monthly repayment.
What is a loan calculator?
A loan calculator is a simple tool used to calculate the monthly repayment of a loan based on the principal amount, tenure, and the interest rate with which you bought it. This calculator will give you an idea of how to spend wisely when you are under debt crunches.
The actual purpose of the Loan calculator
- Maintains a higher credit score
- A time-saving tool with accurate results
- User-friendly and free tool
- Right purchase decision every month
- Changes in monthly budget based on changing monthly repayment
What are the other fees involved while getting a loan?
While many borrowers think that a loan is about the principal amount and interest, it also carries other charges, like,
It is collected to process the loan in banks. This fee ranges from 1% to 5% based on the loan amount, or some banks deduct it at the end while the borrower gets their sanctioned loan amount.
E.g. $1,000,000 loan with 5% as the application fee for which the borrower will receive $950,000; however, the repayment is for $1,000,000.
This fee is pressed on borrowers who pay their loans right ahead of the repayment schedule. This fee is collected in personal loans, mortgages, auto loans, and lines of credit.
Late Payment fee
Borrowers have to pay the lenders a penalty for delayed payments beyond the payment schedule. To avoid this, borrowers can call their lenders and ask them the extend the loan tenure.
Some lenders may ask borrowers to buy personal loan insurance plans that protect against calamities like demise, incapacity, or loss of employment though it is not mandatory.
Before going in for a loan, one must know what type of loan you should get because different loans fall into different categories. As a loan borrower, relax and read further on what type of loan you wish to take based on your requirement.
In general, a loan falls into any of these three categories, namely
- Amortized loan
- Deferred Payment loan
Amortized loans include Students loan, home loans, personal loans, auto loans, and mortgage loans that come under this category, where one needs to make a fixed payment period until the completion of loan maturity.
- An amortized loan payment initially covers the interest cost for the period; any balance is applied to the principal balance.
- An amortization loan's principal payment increases as the interest component of the payment lower.
Deferred payment Loan
A deferred interest loan must be repaid after a specified period. Failing to pay by the specified time, the interest starts to multiply.
E.g. Credit card
A bond is an investment instrument on which one can borrow a loan. This is a risk-free loan option when maintained for a longer period
Now you have clearly understood what type of loan you need to go in for and which category it belongs to.
Which is better: a loan or a credit card?
Some negligent customers get loans through credit cards, which is a huge financial blunder as it involves higher interest rates. But it does have an exception when it comes to payday loans.
What are payday loans?
Borrowing a relatively small sum of money at a high-interest rate with the understanding that it would be paid back when the borrower receives their next paycheck is always a preferable alternative. Considered this as an unsecured loan.
Generally, money lending financial institutes ask for some security on their lent amount, and others check the borrowers' creditworthiness.
Now, this might have raised questions as to who gets what? As a borrower, do I need to submit security, or should I hold high creditworthiness? For this, a borrower can choose between the two based on their necessity.
- Secured loan
- Unsecured loan
What does a secured loan need?
Secured loans are generally given when you want to borrow money for business or personal reasons. When the quoted money for borrowing is high, creditworthiness serves no purpose, and the bank will ask you to submit any collateral under your name.
Advantages of Secured loan
- Secured loans are safe and risk-free, and the borrower can rejoice in lower interest rates as it bears a lower risk for lenders.
- But not all secured loans enjoy lower interest rates, as personal loans with bad credit and short-term installment loans have higher interest rates.
Secured loan default
In the event of a secured loan default, the lender has all rights to seize the collateral to cover its losses.
This type of loan does not need any collateral, but the loan amount will be sanctioned based on the borrowers' creditworthiness. Student loans and credit cards are the best examples. This puts lenders at a huge risk, and they reap the benefits from the borrowers by charging them higher interest rates.
Advantages of unsecured loan
- Getting an unsecured loan is easy and fast as it doesn’t need to collateral verification.
- Best to borrow smaller loan amount
Unsecured loan default
The lender cannot seize assets if a borrower fails on an unsecured loan. However, the lender has other options, including sending a collection agency to retrieve the money back or taking the borrower to court.
What about borrowers with poor credit scores?
As unsecured loans are purely based on high credit scores, borrowers with poor credit scores must take up a cosigner
Lenders will accept a cosigner from loan applicants with a poor credit score. If a borrower defaults, a cosigner must repay the amount. This happens when a borrower forgoes making a loan or debt principal and interest payments.
How do lenders get repaid without a cosigner in an unsecured loan?
If the borrower has a home, the lender may put a lien on it. A lien is nothing but an underlying commitment, such as a debt repayment guaranteed by a lien. The creditor may take the asset covered by the lien if the underlying debt is not paid in full.
The borrower can seize and sell the property when the borrowed amount is not paid. The original holder of the property can never sell without the consent of the actual holder.
What about borrowers with low creditworthiness?
Borrowers with low creditworthiness cannot grab an unsecured loan and must go in for a secured loan by submitting collateral. As the term of the loan increases, the monthly payment decreases but the overall loan amount increases. Be sure to consider any fees you may charge for mortgages and other specific types of loans.
Usage of credit score
Borrowers with good credit scores always get a lower interest rate as they will be regarded as lower-risk borrowers in the eyes of the bank.
The credit score is always denoted in a three-digit number ranging from 300 to 850. A higher number improves your credit score, which adds an advantage. Borrowers need to repay their monthly amount at the right time without being a defaulter, as this will improve their credit scores.
How to check a credit report?
Anyone can get a free yearly credit report from three credit reporting agencies which are available on AnnualCreditReport.com.
Experian, Equifax, and TransUnion are some of these organizations.
Even if you have a strong credit score, ensure your interest rate is suitable; subprime lenders' targeting and discrimination may result in not giving you the rate you should be receiving.
The next question to hit your brain as a borrower is how different interest rates are fixed.
Personal Loan Rates Comparison for the lowest 5 companies
|Company||Fixed APR||Loan Tenure||Minimum Credit score|
|Upstart||5.40% to 35.99%||3-5 years||600|
|Light Stream||5.99% - 23.99%||2-7 years||660|
|Reach||5.99% - 35.99%||2-5 years||600|
|Prosper||6.99% - 35.99%||2-5 years||600|
|Upgrade||7.96% - 35.97%||3-5 years||560|
*APR- Annual Percentage Rates
Plan your loan repayment strategy and determine the best interest rates with our user-friendly Loan Calculator. Take control of your finances and make informed decisions using Allcalculator.net's powerful tool.
What is EMI?
Will banks provide EMI calculators?
As a borrower, why should one use an EMI calculator?
How to calculate interest on the loan?
What is the current loan rate in America?
How much can you borrow on a personal loan in the USA?
Can a borrower get a loan without a job?
Can a borrower get a loan without income proof?
What is an Amortized Bond?
What is a good credit score?
How much does a car loan cost at its highest interest rate?
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