Many people walk to the bank to borrow money for different reasons and emergencies. The International Finance Corporation (IFC) estimates at least 40% of formal micro, small and medium enterprises in developing countries, have fallen short of financing of about $5.2 trillion every year, which is equivalent to at least 1.4 times the level of the global SME lending.
This high level of borrowing is because many consider a loan to be the best choice for instant money than a credit card, which is very high in interest rate. When applying for loans, many people focus solely on the loan interest. They don’t understand that when they take a loan, they incur other charges too.
Ideally, these charges are to be included when a credit officer sells to a consumer, but they do not include leaving the consumer to pay extra charges they hadn’t planned for. As a consumer, you should know how to calculate the interest rate and what charges are included in the interest rate. Let’s see the types of forbrukslån kalkulator and how you can use them.
Use the online personal loan calculation.
Several free online calculators allow consumers to make an informed decision before taking loans. Some tools have variations in charges charged by different banks to allow the consumer to compare the rates and charges of different financial institutions.
Any responsible, financially smart person would train themselves to use this tool because the tool will allow you to know the cost of the loan, the total interest of the principal amount, and the monthly installments for the period of your debt. You can use this calculator for both unsecured and secured loans.
Method of calculating cost of loans:
As you prepare to take the loan, it’s good to understand and choose the interest rate that works for you. We have two major rates known as the flat rate and the reducing rate.
Fixed /flat rate
A fixed or flat rate is where the lending interest rate remains the same throughout your loan period. The interest rate will be known even before you receive the loan approval.
Reducing balance Rate
When using a reducing balance calculator, it mirrors the actual rate of the loan more correctly than the flat method because the flat rate calculator charges interest from the remaining balance.
As a result, the borrower pays only the interest they still owe other than the total interest on the loan divided by the period. On further calculations, you notice that the interest a borrower pays on a flat rate is higher than the interest payable on a reducing balance.
Below are some of the loan calculators that can save money
Loan saving calculator-Credit Rating
When you know how to use the loan savings calculator, you will know how your credit scores affect the interest you pay on loans.
Those with a higher range score can save more money than those with a low credit score. They will charge a person with a low credit rating a higher interest rating. Those with a lower rating can be limited on the amount of loan they can take.
Student loan calculator to save money
Students who have both undergraduate and graduate students loans save if they pay the interest on the loan while they are still in school. In case you cannot pay all, it is important to note even one interest payment during school can save a lot of money in the long run.
Using lump sum additional payment calculation
It is a straightforward decision that makes a big one-time extra payment towards your debt when you make the extra payment.
You will also learn how it will help you pay your loan in a shorter period using a lump sum of your income. If you have other monies, you can make lump sum repayment from it. Some of these monies may come from sources other than your primary income, inheritances, or any money received.
Student loan to pay off calculator
The decision to pay off your student loan before the due date will save you on interest rates.
Student loan income-based repayment calculator
IBR calculator is from the school of thought that believes your monthly installment and how much you pay should be based on your capacity and not on how much you borrowed.
For you to be approved, the government will look into several personal information like your place of residence, income, and family size to qualify you.
Calculate and include additional charges to know the total cost of a loan
To be financially literate, you will need to familiarize yourself with all charges with the loan. Focusing on interest-only is like burying your head in the sand and leaving your body exposed to predators.
The following charges are imposed by the external stakeholders and not the bank.
- Legal Fees: The appointed advocate charge the legal fee.
- Credit Life Insurance: The Insurer charge this amount based on the period of the facility.
- Excise duty: It is twenty percent of the processing fee.
- Appraisal fees– The bank pays the external appraiser who determines the true value of the property or estate.
- Stamp Duty: The Government charges this fee.
Internal charges
Loan processing fees – This is charged to pay for administration fees like paperwork etc.
Conclusion
The Take of this topic is for borrowers to understand that the flat interest rate may look cheaper than the reducing balance rate. But when you look beyond interest, you find cheaper rates may not be better. Many financial organizations will also entice you to take up a facility with them; a car dealership, a real estate company, and so on will be sure to call you. As a smart person, calculate and commit what you can afford to pay with your monthly income.
