A loan calculator is a tool offered, often by a loan provider, to help a customer figure out the repayment terms for a loan. If you are hoping to figure out how much you will repay overall and what your regular repayment amount will be then using a loan calculator is the ideal way to do so. The calculations involved are simple but for those of us who haven’t studied math in many years can seem like a lot of effort. Thankfully, loan calculators have been developed to make it as easy as entering a few numbers and pressing go.
The first piece of information that a loan calculator needs in order to work properly is the amount of money that you are hoping to lend. On some calculators this is referred to as the “principle”. For a pay day loan this is generally a sum lower than $1000. Once you lend this sum you will begin to incur interest on it, meaning that the full amount you pay will be higher to some degree.
The next figure most loan calculators will require is the interest rate that you will be paying, although many loan providers factor their own rates into the calculator automatically. The interest rate is the amount that the loan provider charges you for borrowing their money and it is generally given as an annual percentage rate, even if you are not planning on borrowing the money for a whole year.
This brings us to the final figure required of you before we can calculate the total repayment amount and average installments – the amount of time you need to borrow the money for. With a pay day loan this is always 31 days or less by definition and pay day loan providers will often factor this into their calculators. The amount of time you borrow the money for will determine both how much interest you pay and how high your repayments are. If you borrow a small amount of money for a short period of time you may find that your first repayment constitutes a high percentage of the principle, for instance.
Once you have provided all of the above information a loan calculator will then be able to figure out the total repayment amount that you will have to pay within 31 days of taking out the loan. This is essential knowledge for anyone who is budgeting sensibly. In order to be sure that you are capable of paying back the loan, on time and in its entirety, without incurring additional charges you need to know not just the amount you are borrowing but the full amount you are going to repay.
The average installments are less important for the purposes of a pay day loan. If you were taking a loan out for a year then you might need to know how much the monthly repayment amount was to be able to budget for it. When you are taking a loan out for 31 days, however, you are likely to receive all of the money necessary to repay it in your monthly pay check making the weekly repayment amounts less relevant.