How To Use a Personal Loan Calculator to Estimate Your Repayments

PLP - Personal Loan Calculator

Personal Loan Calculator

You’re thinking about getting a personal loan but puzzled by how to estimate your personal loan repayments? Taking on debt can be a tough decision but it is sometimes a good way to improve your cash flow or to make smart investments for the future. A personal loan repayment calculator can help you to work out your repayments upfront to make a better and more informed decision.

While a personal loan calculator can help you determine how much you would have to repay, we can help you find a lender. It is our mission to make this process smooth and easy for you. Therefore, you simply can apply and we do the searching for you. How easy is that!

What is a personal loan?

A personal loan is a sum of money that you receive from a lender over an agreed-upon period of time for a certain interest. This interest rate is paid to the lender. Small personal loans are often unsecured, while larger loans are secured. If a loan is secured, collateral like a vehicle or property needs to be attached to the application. This provides security to the lender in case you won’t be able to repay the loan. However, this is only really done as last resort and no one is going to take your assets if you simply miss one payment. Additional penalty fees may apply and you can continue with your payments.

Unlike business loans, personal loans are meant for personal purposes only such as paying big bills, buying a car, or as funds for a special event like a wedding.

Introducing Personal loan pal

Before we tell you more about personal loan calculators, we thought we’d introduce ourselves. PLP (as we call ourselves) is a lender-finding service. What does this mean? It means that applying for a loan just got a whole easier. Instead of sifting through all the different online lenders and deciding which one is best, we’ll match you with a lender suited to your financial circumstances. Simply apply in minutes and sit back and relax while we get to work. It’s as easy as that!

Things to consider before getting a personal loan

Suitability

Your lender will assess this question for you and decide whether they think their product is suitable for what you want to do with it. However, it is a good call to compare different lenders to get the best deal possible. Luckily, you don’t have to do that yourself. We can help you to find suitable lenders and we most likely will be able to give you multiple options here.

Affordability

Most importantly, you should assess your financial situation and ask yourself if a personal loan is affordable for you. A loan comes with commitment and missed payments will most likely add additional fees to your payment. It might also be sensible to look into loan protection insurance. Insurance will cover your payments if you unexpectedly become ill or injured and are unable to work. A free personal loan calculator can help you estimate personal loan payments to help you decide if you can afford it.

What is a personal loan calculator?

If you want to know how to calculate personal loan repayments, a personal loan calculator is your way to go. Various lenders provide their own calculators that are specifically tailored to their interest rates and prices. Checking out a generic loan calculator might still be a good idea, it can help you to understand if your potential lender is offering a good deal in comparison to the average. You can even head to our homepage to use our loan calculator.
Most personal loan calculators only need a few numbers:

The loan amount

The loan amount is, first of all, the amount of money you want to borrow. When repaying your loan, you have to add the sum of the interest rate to determine the final sum.

The interest rate

The interest rate is an agreed-upon percentage of your loan that is added on top of your loan amount. The sum of the interest rate is the amount of money that it costs for you to borrow the loan amount. Interest is paid over time and normally expressed as an annual percentage. Does your credit rating affect the interest rate you get offered? Yes, it does. For most personal loans, interest rates are based on your credit score. That means, the better your score, the lower the interest rate you might be able to get. However, there are lenders that can still offer you a loan, even if you have a bad credit rating. You may just have to pay a higher interest.

The term of repayment

The term of repayment is the amount of time that you will need for your repayment. Shorter terms often mean higher payment rates but over a shorter period of time. Shortening your repayment period might also save you money on the interest rate. However, some lenders charge extra if you want to pay out early.

How do you calculate personal loan repayments?

Calculating personal loan repayments can be quite tricky. You can use a personal loan repayment calculator to calculate your repayments. But we will tell you what to take into consideration in case you want to do the maths yourself.

The payment rates that your lender suggests already include the loan amount and on top the interest rate. It is divided into weekly, fortnightly or monthly rates, so you can repay your loan in instalments. By the end of your payments, you’ve paid off your personal loan plus the interest fees.

Your net income with a pay calculator

Before you even think about your repayments, you should think about your budget and what you can afford to repay. Do you know the difference between your gross and your net income? Your gross income is your earnings before you consider additional expenses. It equals your full salary before tax. Your net income, on the other hand, is your take-home pay. That’s the amount of money that stays in your bank account after subtracting health insurance, tax payments and your Super.

Why does it matter? It sometimes feels like you can navigate with much more money than you actually can. It’s much easier to make an informed decision when you know how much money you got spare. If these calculations feel stressful to you, you can use one of the many free pay calculators online to understand your net income:

Actually, there are personal loan calculators for every loan you can think of. Have you been thinking about refinancing a loan? Use a refinance loan calculator to work out if it would save you money. Search for the specific loan and you’re highly likely to find a matching calculator. Even if you are looking for a calculator for a specific sum of money, just type “$10000 personal loan payment calculator” into Google and you will find a result.

Calculating your loan repayments

Your loan repayments consist of the amount of money you intend to borrow with interest on top. Interest is a percentage of your loan that you pay to your lender in exchange for using their money over a certain amount of time. This means borrowing money over a shorter period may increase your payment rates but save you money in interest.

Your repayment calculations might differ depending on the loan you are getting. However, there are different ways to calculate your repayments.

  • Use a personal loan calculator: A loan calculator spreads out your payments nicely already and will give you a similar rate to what you can expect from your lender. It’s super easy and saves your time plus you will be able to find a specific calculator for the loan you plan to get.
  • Build an excel spreadsheet: If you like doing the maths yourself, a spreadsheet in Excel might help to see your debt decrease over time. You can build your own template according to your loan and workout costs and fees nicely.

To calculate your monthly payment, you need to know your interest rate, the amount you want to borrow (principal) and the length of your loan term.

  • Number of Periodic Payments (n) = Payments per year x number of years
  • Periodic Interest Rate (r) = Annual rate / number of payment periods
  • Discount Factor (D) = {[(1 + r) ^n] – 1} / [r(1 + r)^n]
  • Loan amount (A)

Loan Payment = Amount / Discount Factor, or P = A / D

How to calculate personal loan interest rates?

Your interest rate is not the same as your repayment rate. The repayment is pieced together from your overall repayment of the loan amount and the additional interest fee that you pay for borrowing the money.

A personal loan calculator will do the hard work for you but if you want to know how it’s done, go ahead:

The general equation is (interest rate / number of payments) x loan amount = interest

That means you divide your interest rate by the number of annual payments (if you choose monthly payments, it’s 12). Then you multiply this with your loan amount to get your interest rate for the first month. Your interest changes over the course of your payments because you are also paying towards paying off your loan amount. Therefore, you have to do the equation again for the next month with the new loan amount.

Loan amount – (repayment – interest) = new balance for next month

Even if you use an excel sheet to work out your payments, we recommend using a personal loan calculator to check your maths. A calculator might also be a little more precise as your own calculations.
Who is eligible for a personal loan?
We are your Pal and we want to keep things easy. Therefore, we only have a few minimum loan requirements and then will find a lender that works for your personal situation. If you tick all the boxes, what are you waiting for?

  • Be at least 18 years old;
  • Be an Australian citizen or permanent resident of Australia;
  • Have an online banking account;
  • Have at least 3 months of income history on your banking account;
  • Have an active email address and mobile phone number.

That is all. However, one major criterion is that you will be able to repay your loan. If you want to know more about how to calculate personal loan eligibility, keep on reading.

How much can I borrow?

First of all, how much money can you borrow? Depending on what loan you are after, you might be looking for a rather small or rather large one. There are two answers to this question. Firstly, we work with lenders that offer loans from $2,000 up to $50,000. Secondly, and most importantly, you should consider how much you can afford to repay. A personal loan calculator can help you assess if the loan you are after is within your budget. As a rule of thumb, financial advisors recommend you shouldn’t spend more than 38% of your gross income on debt. So you should ask yourself:

  • Do I already have other loans to repay or existing debt?
  • How much do I earn and how much can I afford to spend?

Calculating your rates upfront can help you make an informed decision on how affordable a loan is for you. If you are unsure, don’t hesitate to get in touch. You may also want to speak to a financial counsellor before you take on debt.

How Personal Loan Pal can help you

Have you been looking for a personal loan but you don’t know what to choose? As your Pal, we’re here to help. We can find you a lender if you fulfil our requirements. We do all the hard work for you. Once we find a match, we will let you know straight away. All you have to do is select your lender and they most likely will get in touch with you to refine the loan contract and ensure that you fit their requirements. If you would like to find out more about us, head to our website. For any additional questions, our friendly customer service team is happy to help you.