Amortized Loan: Paying Back a Fixed Amount Periodically
| Approximate Payments: | |
|---|---|
| Monthly payment: | $ |
| Total payment: | $ |
| Total interest: | $ |
Deferred Payment Loan: Paying Back a Lump Sum Due at Maturity
| Approximate Payments: | |
|---|---|
| Amount Due at Loan Maturity: | $ |
| Total Interest: | $ |
Bond: Paying Back a Predetermined Amount Due at Loan Maturity
| Approximate Payments: | |
|---|---|
| Amount Received When the Loan Starts: | $ |
| Total Interest: | $ |
A simple loan is a contract between a borrower and a lender in which the borrower receives an amount of money called the principal that they are obligated to pay back in the future after a specific time.
Most loans can be categorized into any one of three categories:
1. Amortized Loan: Which are fixed payments made periodically until loan maturity.
2. Deferred Payment Loan: Here, a single lump sum amount is paid at loan maturity.
3. Bond: This is where a predetermined lump sum amount is paid at maturity of loan period.
This loan calculator will help you determine the monthly payments on a loan. You need to simply enter the loan amount, the term and interest rate in the fields given and hit calculate.
This calculator can also be used for mortgage, auto, or any other fixed loan types floating in the market. The loan calculator will show you the total cost of the loan, expressed as the annual percentage rate or APR.
How Does it Work?
Loan calculators can actually answer a lot of your questions and help you make good financial decisions in the future. Without taking the help of loans, many of us would not be able to buy a home, a car or afford a higher education.
The fact is that mortgages, auto loans and other types of loans can help us to advance and reach important goals in our individual lives.
The cost of an overall loan depends on the type of loan, the lender, the current market environment and your credit history and income. Borrowers with the best credit profile usually end up securing the best interest rates.
So, before you shop for a loan, you will need to find out your credit score and take a look at your credit report and make sure it’s accurate. You can get your credit report and credit score for free on any online platform easily.
Usually all loans are either secured or unsecured. In a secured loan, the borrower is required to put up an asset as collateral to secure the loan for the lender. A motor vehicle loan is an example of a secured loan.
However, if you don’t make your car payments, the lender will forfeit the car. An unsecured loan doesn’t require any collateral. Personal loans of most types are unsecured.
Mostly while shopping for any loan, it is a good idea to use a loan calculator. This will help you narrow down and filter your search for a home or car by showing you how much you can afford to pay each month in times to come.
It can help you compare loan costs and mark the differences in interest rates that can eventually affect your payments, especially with mortgages.
When you take out a loan, you must pay back the loan plus interest by making regular payments to the bank to prevent consequences. So, you can think of a loan as an annuity you pay to a lending institution mostly financial by nature.
For loan calculations we can use the formula for the Present Value of an Ordinary Annuity:
PV=PMTi[1−1(1+i)n]PV=PMTi[1−1(1+i)n], where
PV is the loan amount
PMT is the monthly payment
i is the interest rate per month in decimal form (interest rate percentage divided by 12)
n is the number of months (term of the loan in months)