How is the loan installment calculated ? Knowing the value of the installment of the loan allows you to understand if the product examined is actually sustainable with respect to its own profitability. Not only. The installment can be compared to that of other proposals, so as to identify the most convenient credit line.
Calculate the loan online: the factors to consider
What are the operations to be performed to perform the loan installment calculation? First of all, the amount to be received must be established, then the amount of the Annual Nominal Rate, also known as TAN, the size of the APR, that is the Global Effective Year Rate, the expiry date and the number of installments that make up the plan refund.
The TAN is a relevant factor because it defines the interests arranged by the lender in relation to the loan amount. The APR instead provides an indication of the overall cost of the credit line, it includes costs not recognized by the TAN.
Generally, however, there are no taxes inherent to the signing of the contract, any default interest and costs related to the recovery of the credit in the APR.
Online loan calculation tools
Let’s get into the merits of the calculation methods. A first option is to turn to the numerous online calculators available for free. Just a simple Google search to locate them.
Various data must be entered (duration of repayment, amount of the loan, rate, expiry of the installments) essential for the calculation. As for the rate, it is preferable to enter the APR. This allows in fact to calculate an installment that includes costs.
On the web, Excel files that allow you to perform the loan installment calculation are also easily identifiable.
What we report below is an example of calculating the installment. We examined an amount of 15 thousand USD, a repayment term of four years and a monthly installment frequency. The APR considered is equal to 8%.
The installment will be 366.19 USD, while the total cost of the loan will be 17.577.30 USD.
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