It’s important to keep your finances healthy even if you have to pay a loan. It means that you can pay the monthly loan costs and fill your daily utilities.
One of the tricks is by calculating the loan payments and costs. Learn how to calculate loan payments and costs below to understand it.
Calculate the Interest on a Loan
Paying a loan means that you pay the principal amount of the money you borrow and the interest. Break it down first if you want to know the way to calculate loan payments and costs.
After that, you get the interest cost of a loan. Say you want to calculate the interest of a $20.000 loan. This loan has a 6 percent APR. You have to pay the money off for 10 years.
First, multiply the loan by 0.06. The result will be the interest on your loan per year. So, it should be $20.000 x 0.06 = $1.200. So, how to get the amount of interest per month?
You only have to divide the annual interest over 12 months. So, it should be $1.200: 12 = $100. So, you have to spend $100 per month only for the loan interest.
Calculate the Amortizing Loan
Say you have a car loan. This loan is classified as an amortizing loan. How to calculate loan payments and costs in case you have an amortizing loan? In this case, you should know the interest rate and the initial balance of your loan.
For example, you have a $40.000 auto loan with a 6 percent and 5 years of repayment timeline. So, it should be 0.006: 12 = 0.005. Then, 0.005 x $40.000: $200. $200 is the amortizing loan you have to pay per month.
Calculate Monthly Loan Payment Using a Calculator
Nowadays, you don’t have to calculate it manually. Thanks to an online calculator that helps to calculate monthly loan payments automatically.
You only have to visit a reputable website that offers a monthly loan payment calculator. There will be some points you have to fill in, including your principal amount of the loan, the interest rate, and the repayment timeline.
Ensure that you enter the right number for each box. Tap the calculate button. That’s it! The calculator shows the result you want.
Calculate Student Loans and Costs
How about if you are a student and want to calculate your loan and cost? You can also use a calculator to get the result.
All you have to do is enter the loan amount, repayment timeline in years, repayment timeline in months, and interest rate per year. Hit the calculate button. Wait for a few moments and check the result.
Learning how to calculate loan payments and costs is so crucial. You will need it when budgeting for repaying the loan and fulfilling daily needs. The result will be different for each person.
The idea of doing it is that you can finish the loan payment and achieve the thing you want without sacrificing your life. It is also an effective way to keep your finances healthy.