Loans can be complicated, especially when it comes to understanding the exact impact a loan will have on your financial future. An effective tool for gaining a clear picture of the impact of a loan on your cash flows is a loan payment calculator.
Calculate Your Loan Payments
This simple loan payment calculator helps you calculate your loan payments if you know your outstanding loan value, the interest rate, and the remaining number of years on your loan. This calculator works for all types of loans – car loans, student loans, credit card loans, personal loans, etc.
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Please enter the inputs as described below.
- Currency (Optional): If you wish to see the output in your preferred currency format, please select the correct value from the dropdown. This loan calculator works for the US, UK, Canada, Australia, Euro-region, and India.
- Total Loan Value: This is the principal amount that you are borrowing from a lender. It is important to input the correct loan value to get accurate results from the calculator.
- Term of Loan (Years): The term of the loan is the length of time you have to repay the loan. Please enter the number in years.
- Interest Rate: The interest rate is the cost of borrowing money, expressed as a percentage. It is essential to enter the correct interest rate, as it directly affects the amount you will pay over time.
The calculator shows the result in a table format. It shows what your payment will be if you choose to pay it off on either a bi-weekly (once every two weeks – 26 times a year), twice monthly (24 times a year), monthly (12 times a year), or annually (once a year).
It also shows the total value of the interest payments that you will make over the entire life of the loan. The higher the interest rate and the longer the term, the more you will pay in interest. This is money that goes straight to the bottom line of the bank and out of your pockets.
A chart is also generated which shows the expected loan balance over time (the black line – values of the left). The chart also shows how your periodic loan payments are being allocated. In the start, the principal payments (in blue, values on the right) are outweighed by the interest payments (in yellow, values on the right). As your loan balance (i.e. the principal) starts to decline over time, a greater proportion of your payments go towards the principal.
The drop down menu helps you get a bit more fine-grained control over the output of the chart. It shows the evolution of the loan and the payments over time based on the option selected.
Benefits of Using a Loan Payment Calculator
It’s important to plan your cash flows and ensure that you’re able to meet all your loan payment obligations and of course your other regular life expenses. Let’s look at some of the benefits of using a loan payment calculator to plan out your financials:
- Informed Decision-Making: The loan payment calculator provides you with crucial information about your repayment schedule and total interest paid. This data allows you to make well-informed financial decisions, ensuring you choose the most suitable loan for your needs.
- Compare Different Loan Options: By using the calculator, you can easily compare different loan scenarios, such as varying interest rates, loan terms, and payment frequencies. This feature empowers you to find the most cost-effective loan option, saving you money in the long run.
- Budgeting and Financial Planning: A loan payment calculator helps you understand the impact of a loan on your budget and overall financial plan. By having a clear picture of your future repayments, you can create a realistic budget and plan your finances accordingly. Failure to make regular payments on your loan can easily land you with collections and all the headaches that come with that!
In many cases, such as a car loan or credit card debt, your interest rate is fixed but you have the flexibility to pay off a loan sooner by making extra payments. Try changing the field for Years to Pay off Loan to see how the periodic payment amount changes. Naturally, the faster you pay off the loan, the higher the payment amount will be.
However the big benefit is that your total interest paid (shown in Lifetime Interest Paid) will reduce dramatically. This is more money in your pocket, rather than in the bank’s profit column.
If you do want to see how much of an impact the interest rate has on your balances, try changing the interest rate field by 50 basis points to see how the results change.
by Andrew Garcia
Andrew, an alumnus of South Florida State College, loves finance, fintech, and coding. When he’s not crunching numbers at the bank, he’s passionately writing about personal finance and building calculators for PFF. See more.