Loan Calculator

Loan Repayment Calculator – How It Work?

This calculator utilizes common principles of the loan and can be used as a basic borrowing calculator for such types of loans as mortgages and car loans.

To kick-start with the loan calculator, you’ll need:

• Enter basic loan details (loan amount, interest rate and loan term);

• Review all additional parameters related to the loan, like compounding and fees;

• Review your inputs to make sure everything is accurate;

• Click the "Calculate" button to generate your estimated loan parameters, including payment schedule and key details;

• If you need to start over, click the "Reset" button to clear the fields;

• You can also use the "Cite" and "Share" buttons at the bottom to reference the calculator or share it with others.

Loan Fundamentals for Consumer

The loan repayments depend the most on the key loan information along, such as:

• Loan Amount

• Interest Rate

• Loan Term

Also, compounding frequency impacts the total amount directly and has to be set according to the certain borrow estimate. A monthly compounding is the most frequently occurring.

Compound interest is the financial concept where interest is calculated not only on the initial loan amount, but also on the interest that has already accrued, resulting in exponential growth over time. The more frequent compounding, the higher total repayment amounts. A compound interest calculator can help with this concept.

If your loan includes an origination fee, you’ll need to input that as well. This fee is usually charged for processing the loan and can affect the total cost of borrowing.

What does APR mean?

Annual Percentage Rate (APR) represents the yearly cost of borrowing money on a loan, expressed as a percentage. It encompasses not only the interest rate but also any additional fees or costs associated with the loan, such as origination fees or closing costs. In loan advertisements or comparison tools, it provides the way to compare different loan offers, as it reflects the true annual cost of the loan. This interest rate calculator can determine the real interest rate.

Secured and Unsecured Loans

A secured loan requires the borrower to provide an asset, such as a home or car, as collateral to secure the loan. This collateral gives the lender a legal claim — if the borrower fails to repay the loan, the lender can seize the asset to recover the outstanding debt. For instance, a mortgage is a common secured loan where the home serves as collateral, and if payments are missed, the lender may foreclose on the property. Similarly, an auto loan uses the vehicle as collateral, allowing the lender to repossess it in case of default. 

Secured loans are typically easier to obtain, especially for individuals with lower credit scores, as the collateral reduces the lender’s risk. Because the lender has a safety countermeasure, secured loans often come with lower interest rates and higher borrowing limits, making them appealing for large purchases. However, the risk of losing the collateral can be significant for borrowers, and if the asset’s value is less than the debt, they may still owe the difference.

An unsecured loan, on the other hand, doesn’t require collateral, meaning the borrower isn’t at risk of losing a specific asset if they default. If a borrower defaults, the lender may turn to collections agencies to recover the debt, but they cannot seize specific assets. 

To determine approval and terms, lenders assess the borrower’s creditworthiness using factors like credit history, income, and debt-to-income. Without collateral, these loans carry higher risk for lenders, which often results in higher interest rates, lower borrowing limits, and shorter repayment periods compared to secured loans. Common examples include personal loans, credit cards, and student loans, where the lender relies on the borrower’s promise and a strong financial profile.