Loan Calculator

When you are applying for a loan one of the things you need to consider is the total amount of your monthly payment, how long you will be paying, and if you only make the minimum monthly payment, what that is going to mean in terms of how much interest you pay over the life of your loan. Financially savvy people who get loans work to pay their loans off as quickly as possible in order to avoid paying more than they have to in interest. One of the best ways to figure this stuff out is by using a loan calculator. A loan calculator is an invaluable tool when you plan to get a loan for a home, car, schooling, or basically any other purchase. A loan calculator will give you a general idea of the total amount of your monthly payment based on interest rate, down payment, and length of your loan, it can also help you see the benefits of paying more down, or ways to lower your monthly payment amount.

Let's take a closer look at loan calculators, where to find them, how to use them, and how they can benefit you.

First off, the best place to find a loan calculator is just to look online. There are tons of them on the internet, almost any lender site is going to have a loan calculator you can use. They are not all as clear or easy to use as others, and some lenders will want you to input personal information before they will let you use it. They do this so they can contact you and try to get your business for the loan. However, because no one wants the pressure of a sales person, it is god to know that there are plenty of loan calculators out there with no string attached, so simply go to a different site.

Also, all loan calculators, whether a mortgage loan calculator or an auto loan calculator are available for free. So, never pay to use one.

So now you know where to find a loan calculator, just look online. Now let's take a look at how to use one:

While every loan calculator is going to be ever so slightly different, they all follow the same general idea for use. Basically you need to have some information, either speculated, or actual quotes from lenders, which you will input in order to get a detailed monthly payment estimate in a few seconds. Let's look at what you would input for a mortgage calculator to make this more clear:

In order to use a mortgage calculator you would start by inputting the total amount you want to borrow, the rate you would get, the term in years, how much the annual taxes are on the property, and any additional costs, such as insurance, it would then generate a payment amount based on the amortization you specified. So you need to know the following to properly use a mortgage calculator:

• The total mortgage loan amount
• The annual interest rate
  
• The term of the mortgage in years
  
• The annual property tax
  
• Annual insurance costs

A mortgage loan calculator will provide a pretty accurate amount of your total monthly payment. Some values will need to be estimated such as the monthly tax, monthly insurance, etc. as they won't be given to you until you close, at least not completely accurately. But guess work can often give you a pretty accurate amount for your total monthly payment.

Some complex mortgage loan calculators will include more information such as your current debts, including car payments, credit card debt, child support, alimony, and other debts, in order to help you better determine what kind of rates you will get, etc. However, these are unnecessary to use. Some loan calculators will also include origination fees, lender's fees, and points and down payments, which can be nice to use as you can see what paying down your rate will do for your monthly payment amount etc.

There are a lot of benefits that can be derived from using a loan calculator, especially if you use one for a mortgage loan. For example, it makes your loan easier to understand. It helps you account for total monthly costs, not just the cost to repay the loan. It is also a great way to help you reversely figure out how much you can afford to borrow. Let's say you know the most you can spend on a mortgage each month is $1700. Well, you can play around with numbers until you get a payment that is equal to that. Then you will know what you can spend.

A loan calculator can also help you get motivated to put more down, buy your rate down, or opt for a shorter loan term. For example, in some cases, the difference in monthly payment between a fifteen year loan and a thirty is only a few hundred dollars, and the amount of interest saved is astronomical. If you were on the fence about whether or not it would really be worth it to stretch your budget a little to go with a 15 year loan, that could help you see the big benefits.

A mortgage loan calculator can also be used to help you determine if you are even going to be able to qualify for the loan you want. A bank will finance a home that runs about two and one half times your annual salary, but only if your debt ratios are right, etc. Basically your monthly debt payments should not exceed 36 percent of your gross monthly income. By using a more complex loan calculator you can input your debts, expenses, and your income. The amounts will be factored and it will provide you with a number that you can actually afford, and that the bank would be willing to lend you. This is an excellent resource because it means you won't be getting your hopes up for the $300k house if you can only afford the $275k house.

If you are buying a townhouse or a condo, or any house that has a monthly fee in addition to the mortgage, such as an HOA fee, you may want to try and find a loan calculator that includes that monthly fee in the mortgage calculation.

So far we have mostly just looked at the benefits of using a loan calculator for a home loan, but they can be used for other things as well, and are equally as useful. For example, an auto loan calculator can help you figure out how much car you can afford before you ever step foot on a lot and start looking. This will save you the heartache of wanting a car you can't have because you can avoid ever even test driving it.

Auto loan calculators are a great way to figure out how much you should put down as a down payment, and are a great tool to help you to compare auto loans you are offered, as well as whether or not rebates that may be available to you are worth it.

An auto loan calculator is going to help you see how much you will pay over the life of the loan for your car. It is going to show you how by having a shorter term, or larger down payment you can save hundreds, if not thousands in interest.

Another huge benefit of an auto loan calculator is it is going to be invaluable when you are trying to figure out which lender is right. There are a ton of choices. Once you have used their auto loan calculator, you can discuss your loan terms, and figure out actual costs versus the slightly exaggerated ones that a salesperson is going to tell you.

Of course there are many other loan types you can use loan calculators for, including personal loans. The point is that if you are trying to choose a lender, determine if the loan is worth it, or if you can afford a loan, or what loan type and plan is best for you, they are an incredible resource. You are bound to find one that you like better than others. So, if you just want to get general ideas on things, look for loan calculators that are simplistic and only require a little bit of information. If you want to know exact dollars and cents for your specific loan, then get one that requires a little more.

Most lenders provide loan calculators, and will calculate everything for you, but it is never a bad idea to double check things on your own, this is especially true if you should choose to finance a vehicle through a dealership, etc. as they often exaggerate a little in order to secure your business. So, do the math on your own, and be an educated consumer.