Every person who considers applying for a loan must first assess his financial stability and repayment capacity before doing so. It is important to keep in mind that certain inconsistencies and lapses in payment can jeopardize your credit score and you might end up buried in debt, due to the accumulation of the loan's monthly interest.
The best way to assess and analyze your payment options before applying for a loan is to use a loan repayment calculator.
- It is important to clear your calculator's memory prior to making a new computation. You do not want to come up with an erroneous repayment figure.
- Make sure that the word "Begin" appears in the calculator's screen before making your inputs. If the word still doesn't appear automatically, you may press the "g" button and then press "7."
- Key in the loan amount you wish to make then press the "CHS" or Change Sign button. After the after figures appear in the screen, press the Present Value (PV) key.
- Enter the term, usually in months, or method over which you want to make your repayments. For example, you want to repay the loan in 5 yrs. Therefore 12X5= 60. Key in "60" then hit the "n" button.
- To enter the interest rate, simply input the rate, followed by the blue "g" button and then press the "i" button. For example, the interest rate is 9%, when you press the "g" and the "i" button, you will get 0.75 rate based on a 9% annual interest rate.
- Enter the lump sum payment by typing the amount you wish to pay at the end of your loan then press the Future Value (FV) button. For example, you want to pay 10% as your lump sum payment, simply press 2000 followed by "FV." The lump sum is optional, if you do not wish to pay a lump sum at the end of your loan, simply type "0" followed by "FV."
- To compute for your repayments, press the "PMT" button, the calculator will then show you your monthly payments.
In summary, you will need to input the loan amount, the repayment terms, the interest rate, and the balloon or lump sum to compute for the monthly repayment. For example, a loan amount of $20000, 60 months payment term, 9% interest rate, and a lump sum of $2000, will give you $386.00 monthly repayment after pressing the PMT button.
Another advantage of having a loan repayment calculator is that it enables you to double check the rates that your financiers quote you. Some financiers are really good in hiding fees and certain charges. You will then be able to save yourself from signing a contract believing that your loan rate is, for example, 8% but with the hidden charges, you are actually paying 8.75% in total.
The loan repayment calculator is indeed a handy gadget for your repayment computations but keep in mind that it also has its limitations. Consult your financial adviser for other criteria such as financial liabilities and future investments before applying for a loan.