Loan Comparison Calculator
Are you thinking about taking out a loan? You’re probably circling around multiple offers, all with different principal amounts and interest rates. This calculator will help you compare the costs associated with up to four different loans.
In the fields provided, enter a principal amount, interest rate, and number of payments for as many as four loans. After entering this data for each loan the results will appear instantly, enabling you to compare monthly payment amounts and total interest charges.
Simple Steps to Comparing Multiple Loans
When you are ready to buy that new car, house, or business, the first thing you have to consider is how to pay for it. Options for financing are plentiful, but that doesn't mean the process is easy. In fact, because there are so many options, terms, and fine print, shopping for a loan is a daunting task that requires thorough research.
Why Would You Need a Loan?
Getting a loan is a serious commitment that can have dire consequences if the terms aren't honored. The first step in doing research for a loan is determining why you need a loan. Length of repayment, interest rates, and the credit scores required vary depending on how much money you need and what you will do with the money.
Most people do not have thousands of dollars on hand to pay for expensive items. Here are some common reasons you will need to secure financing.
- Mortgages: If you can't pay cash when you buy a home, you negotiate a loan with a bank to purchase the home for you. Your monthly payment to pay the loan back is called a mortgage.
- Home improvements: Homes often need updating over time, whether due to normal wear and tear or appliances and decor that could use updating. You can borrow money to complete house projects if you don't have the cash on hand.
- Car loans: Buying a vehicle can be expensive, especially if it's brand new car. You can buy your car through a bank or credit union and pay the loan back monthly. Your monthly payment is called a car note.
- School tuition: Education can cost thousands of dollars, from vocational school to community college to the university level. There are several ways you can pay for tuition, and most loans have terms that delay repaying the loan until the schooling is completed.
- Business expenses: Running your own company or organization means you need to have resources to pay overhead, such as staff compensation, supplies, and office space. Small business loans are available to help offset some of those costs. The amount of the loan given depends on the type of business and your plan to sustain the business to pay back the money.
- Emergencies: Sometimes situations arise that you just don't see coming. Medical emergencies, unforeseen car repairs, damage to your home from a natural disaster, and many other problems may arise and cost money to handle. If you don't have enough savings to address emergencies, you may decide to get a short-term loan to cover the expenses.
- Special events: Special events may be expensive, such as wedding or rites of passage ceremonies, like bar or bat mitzvahs and quinceañeras. If you're not paying with cash, financing them requires examining which loans make the most sense for you.
Different Types of Loans
The type of loan you get will determine how you need to pay it back and what happens if you can't pay. Loans can be borrowed from private lenders or from governmental institutions.
- Secured loans: A secured loan is obtained by using property and things you own as collateral. If you cannot pay back the loan, the lender will take your property instead. Collateral for a loan has to be valuable, such as a car, home, or assets.
- Unsecured loans: As the name implies, unsecured loans are the opposite of secured loans. Unsecured loans don't use collateral so lenders consider them more high risk. Lenders will typically charge higher interest for these types of loans.
- Home equity loans: A home equity loan is a type of secured loan that offers your home as collateral. While it can be a great way to finance a project such as home repairs, if you cannot make the payments, you can lose your house. Loans can be disbursed as a line of credit or in a lump sum.
- Installment loans: An installment loan is a type of secured loan where you have to pay back the money over time.
- Credit cards: People may not consider credit cards a type of loan, but any instance where you have to pay money back is a loan. Credit cards come from a variety of companies and banking institutions and they are typically paid in monthly installments.
Simple Steps to Comparing Multiple Loans
Your most important tool in finding a reasonable loan is research. Following is a checklist to make sure you are finding the best loan for what you need and that you are agreeing to manageable terms for repayment.
- What type of loan is it?
- How much are you borrowing?
- How much is the interest rate on the loan? Is the interest compounded and if so, how often? Compounded interest is interest charged on interest. For example, if you owe $100 and there is 10 percent interest, the interest compounds because you're charged interest not on $100, but on $110. Some credit cards have interest that compounds daily so be sure to check.
- How much are the payment amounts and when are they due? You can estimate how much you could owe with online tools such as the Fixed Interest Loan Calculator and you can compare up to four loans with the Loan Comparison Calculator.
- Is there a fee for late payments? How much?
- Do you have a grace period for payments? A grace period gives you some time after the payment is due to send the payment without a late fee.
- What happens if you can't pay back the loan? The inability to pay back a loan according to the agreed terms is called defaulting on the loan.
- How many payments can you miss until you are considered in default? Different type of loans and lenders will have varying timeframes to default. For most federal student loans, you go into default after 270 days without making a payment.
- Is there a penalty if you pay the loan early?
- What do the laws in your state say about the type of loan you are borrowing? Some loans have caps on interest rates, fees, and penalties, depending on where you live. Make sure you are not agreeing to terms that are actually illegal for a lender to set.
- Do not sign any paperwork without reading all the fine print and asking representatives for clarification.
- Make sure you know how to reach your lender's customer service department. Always keep track of your account number, most recent statement, and contact information for a representative to discuss your repayment progress, especially if you have fallen behind on payments.
Loans to Avoid
Some predatory lending institutions set such outrageous interest fees and penalties that you should avoid them altogether.
- Payday loans: Payday loans are quick loans that you can get until your next paycheck. These kinds of loans are illegal in some states because lenders charge extremely high interest rates. The danger of these loans is that if you don't pay them back right away, you can end up with a large amount of debt even if the amount you borrowed was small.
- Tax refund loans: Unscrupulous tax preparers will offer a cash advance on your tax return for extremely high interest rates and fees. Interest rates as high as nearly 800 percent have been reported and you also don't know if the tax preparer submitted accurate information to the IRS on your behalf. With a tax refund loan, you could end up out of money and owing the government.
Avoid any lender that won't give you the information to make the best choice for your loan. By law, you have a right to find the best options for yourself. Make sure you know simple steps to comparing multiple loans before you make a decision.