Borrowed amount and repayment period#
| Loan amount and pay time | ||
| Loan amount (borrowed cash) | ||
| Currency | ||
| Loan term (repay time) | ||
| Loan percent | ||
| Annual interest rate | ||
| Payments type | ||
| One time fees | ||
| One time fee depending on loan amount (e.g. insurance calculated as percent of borrowed amount) | ||
| Fixed one time fee (e.g. one time fee for application processing) | ||
Common sense tells#
You borrowed 1000.00 USD. The planned repayment time is 2 years and the annual interest rate on the loan is 6.5%.
The total amount to be repaid is 1068.99 USD. The repayment is divided into 24 monthly installments of 44.54 each.
The effective annual percentage rate (EAPR) of this loan is 6.685272216796874%.
The total amount to be repaid is 1068.99 USD. The repayment is divided into 24 monthly installments of 44.54 each.
The effective annual percentage rate (EAPR) of this loan is 6.685272216796874%.
Results - summary#
| Loan amount, rate and pay time | ||
| Loan amount (cash that you get to dispose) | 1000.00 | |
| Annual interest rate | 6.5 | |
| Loan term (repay time) | 2 years | |
| Amount and number of installments | ||
| One pay type | constant payment (amortizing loan) | |
| Amount to pay per each installment | 44.54 | |
| Number of installments | 24 | |
| Effective loan cost | ||
| Total cash to pay back (as monthly installments) | 1068.99 | |
| Effective Annual Percentage rate (EAPR) | 6.69 | |
Simulation of loan repayment#
| Month | Payment | Left to pay | ||||
| Principal | Interest | All | Principal | Interest | All | |
| 1 | 39.13 | 5.41 | 44.54 | 1000.00 | 68.99 | 1068.99 |
| 2 | 39.34 | 5.20 | 44.54 | 960.87 | 63.58 | 1024.45 |
| 3 | 39.55 | 4.99 | 44.54 | 921.53 | 58.38 | 979.91 |
| 4 | 39.77 | 4.77 | 44.54 | 881.98 | 53.39 | 935.37 |
| 5 | 39.98 | 4.56 | 44.54 | 842.21 | 48.62 | 890.83 |
| 6 | 40.20 | 4.34 | 44.54 | 802.23 | 44.06 | 846.29 |
| 7 | 40.42 | 4.12 | 44.54 | 762.03 | 39.72 | 801.75 |
| 8 | 40.64 | 3.90 | 44.54 | 721.61 | 35.60 | 757.21 |
| 9 | 40.86 | 3.68 | 44.54 | 680.97 | 31.70 | 712.67 |
| 10 | 41.08 | 3.46 | 44.54 | 640.11 | 28.02 | 668.13 |
| 11 | 41.30 | 3.24 | 44.54 | 599.03 | 24.56 | 623.59 |
| 12 | 41.52 | 3.02 | 44.54 | 557.73 | 21.32 | 579.05 |
| 13 | 41.75 | 2.79 | 44.54 | 516.21 | 18.30 | 534.51 |
| 14 | 41.98 | 2.56 | 44.54 | 474.46 | 15.51 | 489.97 |
| 15 | 42.20 | 2.34 | 44.54 | 432.48 | 12.95 | 445.43 |
| 16 | 42.43 | 2.11 | 44.54 | 390.28 | 10.61 | 400.89 |
| 17 | 42.66 | 1.88 | 44.54 | 347.85 | 8.50 | 356.35 |
| 18 | 42.89 | 1.65 | 44.54 | 305.19 | 6.62 | 311.81 |
| 19 | 43.12 | 1.42 | 44.54 | 262.30 | 4.97 | 267.27 |
| 20 | 43.36 | 1.18 | 44.54 | 219.18 | 3.55 | 222.73 |
| 21 | 43.59 | 0.95 | 44.54 | 175.82 | 2.37 | 178.19 |
| 22 | 43.83 | 0.71 | 44.54 | 132.23 | 1.42 | 133.65 |
| 23 | 44.07 | 0.47 | 44.54 | 88.40 | 0.71 | 89.11 |
| 24 | 44.33 | 0.24 | 44.57 | 44.33 | 0.24 | 44.57 |
| All | 1000.00 | 68.99 | 1068.99 | 0.00 | 0.00 | 0.00 |
Some facts#
- There are many credit (loan) offers available on the market that differ from one another. The exact conditions under which the loan is concluded are regulated by contract between the borrower (consumer, entrepreneur) and the lender (usually the bank). Therefore you always should analyze your contract before signing.
- The most important parameters characterizing a particular loan offer are:
- Loan amount - it's amount of cash, which you get from lender (e.g. the bank).
ⓘ Example: John wants to buy a flat for 250,000 USD, but he has only 50,000 USD. So, he borrows missing 200,000 USD to buy the flat immediately. In this case, the loan amount is 200,000 USD, because the bank lent this amount of cash to him. - Loan term - this is the period when we commit to repay the entire loan. In other words, this is the date of the last loan installment.
- Nominal annual interest rate (NAPR, nominal APR) - this is the base gratification that a lender (e.g. the bank) gets in exchange for giving us a loan.
- Simply speaking: we got some amount of cash from lender (→ see loan amount above), but we have to return amount increased by a certain percentage. Annual interest rate tells us how high this percentage (rate) is.
- Annual interest rate is given on an annual basis (similar to interest rate for bank deposit).
- Annual interest rate depends on the specific contract between the lender and the borrower. However maximum allowable rate is limited by law in some countries. For detailed information you should review local law.
- There are two common annual interest rate models:
- constant payment - all installments are equal,
- decreasing payment - the first installment is the highest, but next installments are systematically decreasing.
- constant payment - all installments are equal,
- Simply speaking: we got some amount of cash from lender (→ see loan amount above), but we have to return amount increased by a certain percentage. Annual interest rate tells us how high this percentage (rate) is.
- One time fees - it's all extra fees, which increase total loan cost, but they do not derive from the annual interest rate. These fees may vary widely from one loan offer to another and they depend on loan contract. Examples of these extra fees can be arrangement commision or optional loan insurance.
- Loan amount - it's amount of cash, which you get from lender (e.g. the bank).
- Because extra fees are not standarized in most countries it's hard to compare one loan offer to another. To solve this issue, the concept of the effective annual percentage rate (EAPR, effective APR) was introduced.
- Effective annual percentage rate shows the real, total cost of the loan including all extra fees too.
ⓘ Example: Marry needs to borrow 1000 USD for one year. Two lenders offer her a loan with nominal annual percentage rate equals to 6%. However, the second offer includes addtional one time fee in the amount of 500 USD. When we compare these two offers we can see:
- offer #1:
- total loan cost = 6% from 1000 USD = 60 USD,
- EAPR = 60 / 1000 = 6%
- total loan cost = 6% from 1000 USD = 60 USD,
- offer #2:
- total loan cost = 6% from 1000 USD + 500 USD (one time fee) = 560 USD,
- EAPR = 560 / 1000 = 56%.
- total loan cost = 6% from 1000 USD + 500 USD (one time fee) = 560 USD,
⚠ WARNING! As we can see from above example the effective annual percentage rate (EAPR) can be greater than nominal one. Unfortunately many lenders abuse this fact to hide real loan cost inside extra fees. So, be cautious and always ask for effective APR before you sign your loan contract! - offer #1:
- Effective annual percentage rate shows the real, total cost of the loan including all extra fees too.
What is the meaning of each calculator field ?#
- Loan amount - the amount of money, which you're going to borrow
- One time fees - the total amount of one time fees in percents. Those are things like arrangement commision, insurance etc.
- Loan term - estimated total time of loan repayment in months or years
- Annual interest rate - annual interest rate in percents. This is the profit which bank earns for the fact it borrows you the money. You can also choose between constant and decreasing rate here.
- Simulation of loan repayment - this table shows repayment process month by month. If your loan is "decreasing payment" type, you will see how payments are changing over time.
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