A loan payment calculator computes monthly payments, installments and interest rates of your loan. The purpose of this calculator is to lessen your financial burden and create a balance in your payments according to your wages. This calculator can be used with federal education and most private loans.
When this calculator is used, it is thought that the interest rate remains the same throughout the life of the loan. Another assumption made is that the installments will be constant throughout the period of the loan. Although the results are not as accurate as they are assumed to be, the main purpose is to recover the average arrived at by the calculator. Some of the alternate payments are lesser than expected while others are higher.
Variable Interest Rates
Many popular educational loans like Stafford and Plus have variable interest rates. Generally, the broker through whom you are going to get your loan suggests the interest rate suitable for you. For instance, suggested interest rates are 8.25% for Stafford and 9% for PLUS currently. These are the maximum interest rates you will pay for these loans. Perkins has a fixed interest rate of 5%.
Contingent Payments In Loans
Certain payments are not sure to occur. These are known as contingent payments or contingent income. Graduated and contingent payments reduce the average of the calculated amount.
Available Loan Calculators
You can find these loan calculators on websites of different loan providers. An easy method of observing the variation in different loans is to enter the minimum and the maximum amounts in the calculator. By doing so, you can get an idea of the difference in the installments of the loan.
Advantages And Disadvantages
Loan calculators do reduce the burden on a prospective borrower by presenting an immediate picture of what to expect. Loan payments can be calculated quickly and conveniently. Interest rate effects can actually be seen on payments beforehand. A calculator can help a prospective borrower plan ahead and save accordingly for the payments. It is easier to envisage the long term costs of a loan using a calculator. Such costs are sometimes ignored since the initial payment terms are very reasonable. This can also happen when fine print is ignored. These calculators can also be used to calculate the effects of different payment scenarios. One can insert different possible figures available for property and income and calculate the amount of expected monthly payments. Possible downside of using these calculators can be the absence of personal contact. Certain aspects may be ignored and the prospective borrower may end up with an unrealistic picture of what to expect.
Since most loan calculators have limited input criteria, a payment calculated this way might not be a reflection of actual circumstances of the individual borrower. These aspects usually surface when a borrower actually visits a lender and asks questions. It is safe to say that one should investigate further after using one of these calculators.