Loans Calculator Benefits
A loans calculator is a valuable tool to use before you take out a home, car or personal loan. Borrowing money is a big step, whether it’s a few thousand as a personal loan to help with your holiday expenses; or $400,000 to buy your first home. Remember that when you take out a loan, you are entering into a legally binding contract to repay a certain amount. It’s important to think carefully about what you can afford before you take this step.
So before you start negotiating a new loan, and definitely before you sign a loan contract, one of the many things you should do is use a loans calculator to figure out what you’re in for financially.
A loans calculator will ask you some very simple questions. First, you’ll choose what type of loan (home loan, car loan, or personal loan). Then you’ll enter the amount you wish to borrow, the interest rate, and the term over which you’ll repay the loan. After entering that data, the loans calculator will produce a list of actual loans from lenders, with information about the products, their interest rates, and your monthly repayments. Importantly, these will be actual products you could apply for today, not just hypothetical scenarios.
By altering some of these parameters in the loans calculator, plus others like whether you can afford to make extra repayments, you’ll get a much clearer picture of how affordable your plans are. For example, you should see what happens if interest rates are a full 2% higher than the current level. You might find you could afford the extra monthly cost; or you might find you’d be in serious financial difficulty, in which case it makes sense to build up a bigger deposit for the home or car or holiday you’re looking for, and wait longer to borrow.
One of the other benefits of using a loans calculator is that it could actually help you negotiate a better deal from your lender. When you start discussing your loan, the more information you know about alternatives and what they’ll cost you the better. It’s hard to haggle for a better deal if you don’t have information about what alternatives exist.
For example, you can determine how important a 0.25% reduction in interest rate might be, and so be able to negotiate hard on this point. Information is definitely power when it comes to dealing with financial institutions, and using a loans calculator is one of several things you can do to be better informed before you talk to your current lender, or to several new ones.