How to Calculate Loan Payments and Costs

Getting a loan is a basic part of adult life. Whether it is something small to tide you over until the next payday, help to pay for a new car, a financial aid for college, or a mortgage, we all have to apply for one at some point. But before you start signing those papers, it is a good idea to understand what you will be paying, to who, and with what kind of interest and additional costs. These things should be established before you even submit your name for consideration.

Photo by photosteve101 via Flickr

Calculating the costs of a loan on your own before applying for it will mean you know what to expect before you speak to the lender. This is important, as you will be prepared. Too often we agree to terms we wish we hadn’t because we find ourselves flustered and rushed to the signing point. If you know what you are getting into before you submit the paperwork, there will be fewer chances of surprises, and so fewer mistakes along the way.

Check out these helpful tools that will aid you in getting the best out of your loan.

Loan Payments

The key consideration for most will be how much you will have to work into your monthly budget to pay off the loan. This will be based on the initial amount, and any interest and fees that are placed on by the bank or institution that are issuing the loan. Remember that the longer the terms are for the loan, the higher the interest is likely to be, and so the more you will pay in the end. You may also find yourself running into the issue of paying only to the interest, and not to the principle. Make sure you work it out, using one of these calculators.

Loan Costs

The biggest problem people run into when they are looking into a loan is figuring out how much interest or APR they will be paying at the end. The percentage may seem low on paper, but when you convert that to a dollar amount and it begins to add up it can get out of control really fast. You should calculate the costs now, then add it to the principle.


Amortization is basically the amount that is paid to the principle. When you pay on a loan, the first bit that will be put on your balance in on the interest that is acquired. Once that is covered, everything left is put to the principle. But if you aren’t giving enough, or your interest is too high, it never makes it to the balance. Learning how amortization works can really help you in the long run.

Last bu not least, it is a good idea to shop around for the best interest rate on your loan, here is our best mortgage rates tool for U.S.-based loans.

About the Author

By , on May 22, 2011
Ann Smarty
Ann Smarty is a search blogger and social media enthusiast. She has recently started a community of guest bloggers and looking for beta testers. So if you like guest blogging or accept guest posts, please join and make it better!

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