If you are thinking about getting a mortgage, car loan, or some other type of consumer debt you may want to calculate the payment terms before you contact a lender. To calculate payment terms you will need the terms and conditions of the loan. Sometimes you may not know exactly what your terms will be until you contact the lender because it could depend on your credit report. You can however get a rough idea of what the payment terms will be by utilizing certain tools.
First determine what type of loan you are in need of. You may have need for a mortgage, car loan or even a credit card. Each of these types of loans will need similar but somewhat different tools to calculate payment terms. To calculate the terms you will need a loan calculator specific to the type of loan you will be receiving. There are even calculators that help you determine when a credit card balance will be paid off based payment amounts other than the minimum payment.
Get a mortgage loan calculator. A mortgage loan calculator will help you determine your monthly payments. You can find one at Bankrate.com. For example if you have a loan for $165,000, which has a term of 30 years, with an interest rate of 7 percent your monthly payments will be $1,097.75. If you make this payment amount every month, on time, your loan will be paid in full after 30 years. You can increase the payment amount and pay your loan off sooner and save money. The mortgage loan calculator can help you determine how much sooner your loan will be paid off based on your extra principal payments.
Get a auto loan calculator. If you have an auto loan in the amount of $15,000, with an interest rate of 10 percent your monthly payment will be $380.44 if the loan term is 48 months. If you want a longer time frame your payments will be lower but you will pay more in finance charges. With a 60 month auto loan your payments will be $318.71. Multiply your monthly payment times the loan term and you will get the total amount of the loan. Take 60 times $318.71 and you get a total loan of $19,122.60. Subtract the loan of $15,000 from the total and you get finance charges of $4,122.60 over a 60 month period.
Get a credit card calculator. A calculator is really needed for credit cards. When you get your credit card statement, with a balance, there is no term such as 48 or 60 months indicated. You don’t really know when your account balance is going to be paid off. A credit card calculator helps you to solve that problem. Enter your credit card balance and interest rate into the loan calculator. Now enter the amount you would like to pay monthly, (you are required to at least pay your minimum monthly payment). If your credit card balance is $5,000 and the interest rate is 7 percent and you want to pay $125 per month, your card will be paid off in 46 months. You can also enter how many months you want to take to get the card paid off instead of the payment amount and the calculator will let you know how much you need to pay monthly.
If your interest rate increases you may need to calculate payment terms all over again. Using your credit cards will increase the balance and you will need to calculate your payment terms all over again.
- Bankrate.com: Mortgage calculator
- Bankrate.com: auto loan calculator
- Bankrate.com: credit card calculator
- Consumer Financial Protection Bureau. "What Is an 'Interest-Only' Loan?" Accessed July 1, 2020.
- Consumer Financial Protection Bureau. "What Is Amortization and How Could It Affect My Auto Loan?" Accessed July 1, 2020.
- California State Board of Equalization. "Lesson 7: Periodic Repayment (Assessors’ Handbook 505, Column 6)." Accessed July 1, 2020.
- MIT OpenCourseWare. "Chapter 17: Mortage Basics II: Payments, Yields, and Values." Accessed July 1, 2020.
- Bank of America. "Example of Credit Card Agreement for Bank of America Visa Signature Accounts," Page 8. Accessed July 1, 2020.
- Board of Governors of the Federal Reserve. "Regulation Z Truth in Lending: Introduction," Page 12-19. Accessed July 1, 2020.
- Consumer Financial Protection Bureau. "Learn About Loan Costs." Accessed July 1, 2020.
- Consumer Financial Protection Bureau. "CFPB Report Finds Sharp Increase In Riskier Longer-Term Auto Loans." Accessed July 1, 2020.
- Consumer Financial Protection Bureau. "Can I Prepay My Loan at Any Time Without Penalty?" Accessed July 1, 2020.
- If your interest rate increases you may need to calculate payment terms all over again.
- Using your credit cards will increase the balance and you will need to calculate your payment terms all over again.
Melvin J. Richardson has been a freelance writer for two years with Associated Content, and writes about topics such as banking, credit and collections, goal setting, financial services, management, health and fitness. Richardson has worked for several banks and financial institutions and gained invaluable experience and knowledge. Richardson holds a Master of Business Administration in Executive Management from Ashland University in Ashland Ohio.