Long before people apply for a Personal Loan, many ask themselves, “how much can I borrow?” The answer to that question may best be determined by enlisting the help of a personal loan calculator.
These financial planning tools provide everyday people with a user-friendly opportunity to produce reliable estimates. A personal loan calculator allows potential borrowers to conduct concise due diligence about the impact of interest rates, repayment options, and monthly installments. When working families experience unexpected expenses, want to consolidate debt, or take a luxurious vacation, a personal loan calculator will help answer the question, “how much can I borrow?”
What is a Personal Loan Calculator?
Borrowers predominantly use a personal loan calculator to determine their monthly loan payments. The conventional wisdom involves reviewing income, expenses, and arriving at a payment amount people feel comfortable paying each month. The interest rate you qualify for will also play a pivotal role in monthly payments and total repayment. That being said, these are ways to creatively use a free personal loan calculator.
- Loan Amount: Input the amount you plan on borrowing. If you anticipate using the funds for necessary home repairs, renovations, or a wedding, among others, it may be prudent to consider adding 15 percent for unexpected expenses. It is better to have the resources and not need them, than fall short.
- Interest Rates: The interest rate you secure will be driven by your credit score, income, assets, and other factors. When working through the numbers, insert low, mid-level, and relatively high rates to see monthly repayment differences. These calculations will provide a baseline of what lending professionals can offer. But the final number can only truly be known by contacting a lending professional.
- Length of Loan: You’ll likely see repayment options on the personal loan calculator. It’s essential to remember that when using the same loan amount, long-term loans accrue more interest over time than a loan with a shorter term. That means a seven-year loan costs more than a five-year loan overall, however, some families may prefer the smaller monthly loan requirement.
The information generated from a personal loan calculator does more than answer “how much can I borrow.” These free online tools save people time, money and help working families feel confident about their financial future. Take your time and play around with different variables until you feel good about the numbers. Once you’re satisfied, contact your local lender.
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A Personal Loan Calculator Helps You Avoid Overspending
People generally conduct due diligence with a personal loan calculator to identify how much they can borrow. But what many discover during the process involves how much they can afford to borrow. Although a calculator remains a vital tool, loans products are not approved in a vacuum. They must also be part of a working family’s financial planning.
For example, consider the financial implications of taking out a Personal Loan while struggling with credit card debt. Should you squeak through and gain approval, multiple monthly payments and excessively high interest negatively impact financial health and wellness. But what if you secured a Personal Loan as part of a debt consolidation plan?
This strategy could reduce the money spent on unreasonable interest rates and credit card fees. By running the numbers through a personal loan calculator and paying off debts with a low-interest personal loan, community members improve their financial situations. In this way, a personal loan calculator doesn’t just prevent overspending. It provides valuable insight into how to keep more of your hard-earned salary.
Things a Personal Loan Calculator Can’t Determine
A personal loan calculator is a tool similar to a blank canvas. Users are tasked with gathering pertinent information to begin the loan estimation process. Before sitting down to run the numbers, consider the following issues.
- Credit Scores: Consider getting a free copy of your credit report from the three major institutions — TransUnion, Equifax, and Experian. Check the information for accuracy and request changes to any errors. It may also be worthwhile to address any blemishes and improve your score. Typically, a higher credit score results in a lower loan rate.
- Debt-to-Income Ratio: Lending professionals consider debt-to-income ratios when approving or denying personal loans. Debt-to-income ratios compare how much you owe each month to how much you bring home. Many lenders prefer debt-to-income ratios no higher than 40 percent. It’s usually worth discussing how much discretion a lending professional is willing to offer.
- Fees: The differences in origination, application, and peripheral loan fees, can prove startling. These costs cannot be determined using a personal loan calculator. That’s why it’s essential to meet with an experienced lender, discuss fees, and make an informed decision.
If you are having a hard time qualifying for a personal loan on your own due to low credit scores or a lack of credit, a co-signer with a good credit score could help lower the interest rate and open doors to favorable terms.
Other Money-Saving Calculators
It’s essential to understand that a personal loan calculator is not the only calculator available to help consumers make good financial decisions and save money. Taking a few minutes now to review the free calculators below could result in large potential savings for you and your family.
- Debt Consolidation Calculator: This online resource is tailored to help answer the question of whether debt consolidation is right for you. A reliable debt consolidation calculator highlights how much money you can save by securing a debt consolidation loan.
- Debt Elimination Calculator: This tool helps people see the light at the end of the debt tunnel. It also provides actionable information about how to become debt-free faster and which debts to pay off first.
- How Long Will It Take To Pay Off My Loan Calculator: Loan payoff calculators indicate when loans will time out if monthly installment terms are met. They can also provide data about early repayment when you increase monthly installments.
- How Much Will I Need to Save Calculator: A savings calculator helps working families budget for long-term goals. Prime examples include setting aside money each month to save for a 20-percent home loan down payment or a dream vacation.
Using a specific loan calculator can streamline the borrowing and debt reduction process. Of course, these online platforms cannot replace the personalized experience of working with a lending professional but are a great tool to indicate where potential savings may be hiding.
In Over Your Head? Here’s How to Get Help
If you are considering applying for a Personal Loan and have conducted due diligence using a personal loan calculator, it’s time to meet with your local lender. At Allegiance Credit Union, our experienced lending professionals work diligently to offer the lowest rates and most favorable terms possible. If you are ready to apply for a Personal Loan or have questions about your unique financial situation, contact Allegiance Credit Union today.