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Loan Calculator
Before you can make good financial decisions, you have to be able to understand those decisions and their effects. Since the purpose of this site is to help you to understand those decisions, I have created various Financial Calculators. The first of these is a basic Loan Calculator. Using this, you can calculate payments, payoffs, interest rates, and loan amounts whether you are talking about a mortgage, credit card, student loan, or any other kind of debt.
Example
We’ll start with a basic example. Let’s say you would like to take out a mortgage for $100,000. You expect an interest rate of 10%. You plan on taking out the mortgage for 30 years. Now, you want to know how large a payment to expect. You would enter the values as follows, and click the Compute button next to the Payment box.
This is the basic functionality, but there is a little more to understand to get full use out of the calculator. The features are as follows.
- Loan Amount
- The current amount of the loan or debt.
- Interest Rate
- The annual interest rate on the loan or debt.
- # of Yrs
- The term of the loan or debt.
- Payment
- The payment on the loan or debt.
- # Int Cmpd Yr
- The number of times interest is compounded yearly on the loan or debt. This is typically 12 (monthly) for mortgages or loans and 365 (daily) for credit cards.
- # Pmts Yr
- The number of payments per year on the loan or debt. This is typically 12 (monthly). Occasionally, you may use 1 (annual).
- Loan Type
- Immediate or Due. Lets say you pay January’s bill on January 1st. This is an Annuity Due. If instead you pay January’s bill on January 31st or Feb 1st, this is an Annuity Immediate. Most debts are Immediate, meaning you pay the bill at the end of the month it refers to.
With these settings, you can determine basically any aspect of any debt you have. Let’s look at a few more examples.
Mortgages and Loans
Using this calculator, you can obviously determine your payment. But, you can also change the values, recalculate, and look at other parts of the loan. Lets say, you want to pay off your existing mortgage early. You can enter all the values for your mortgage, then increase the payment and recalculate your term.
Now, lets say you are considering refinancing, and want to see if it will be worth while. You can enter your current mortgage values, change the interest rate, and recalculate. You can do this for several values to see how good of a rate you need to give you enough savings to be worthwhile.
Finally, you can use this calculator to determine how expensive a home you can afford, based on the monthly payment you can make. You need to enter your expected interest rate, term, and payment. Don’t forget that you may also have to pay homeowners insurance and possibly mortgage insurance on top of the payment.
Credit Cards
You can look at credit cards with the calculator in a similar way. You will need to change the # Cmpds Yr to 365, since credit cards compound interest daily. You can then see how an increased payment reduces your term, etc.
Other Debt
This calculator can also be used for student loans, or any other type of debt. If you need a little more powerful calculator, and you are familiar with use handheld financial calculators, there is also a TVM calculator on my Calculators Page.
Calculator Usage
The calculators provided on my Calculators Page are freely available on this site. They are also available as Google Gadgets or as Widgets to place on your own website or blog. Just click the “Get Widget” or “Google+” buttons next to the calculator.
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