Loan Calculator

This calculator will compute a loan’s monthly payment amount based on the principal amount borrowed, the length of the loan and the annual interest rate. Then, once you have computed the monthly payment, click on the “Create Amortization Schedule” button to create a report you can print out. Note that each time you change one of the loan’s variables you will need to recalculate the monthly payment before creating the Amortization Schedule.

Longer term loans may take a few moments for the report to be generated.

*Disclaimer: This calculation is based on the information you entered and is for illustrative purposes only. This calculation reflects amounts in U.S. Dollars. All loan figures are based on non-commercial usage and are subject to credit approval. Actual monthly payments may vary depending upon loan type, other possible fees, and the strength of your credit. Contact Partners FFCU for an exact monthly payment.

Deciding How Much to Borrow

Deciding how much to borrow depends on what kind of loan you’re considering. Home loans, for example, should represent no more than three times your annual income. This means that if you earn $100,000 per year, your desired mortgage amount would be no more than $300,000.

Other guidelines come into play as well, so the amount that you’re borrowing should always take those into account. Some factors will remain constant regardless of the type of loan you’re considering. These include:

• Income stability – The amount of time you’ve spent at your job can greatly affect your creditworthiness. Longer employment terms figure favorably for lenders, as do careers in areas that aren’t typically affected by economic downturns. In general, the more stable your employment history and future employment prospects, the more you may be able to borrow.
• Credit score – Your credit score is a number that’s based on your past payment history, whether or not you have unpaid accounts in collections, and how many open credit lines you currently have, among other factors. The higher this number is (it can range from below 500 to 850), the better your chances for being approved for a loan.
• Debt-to-income ratio – How much debt you currently have may greatly impact how much you can borrow. If you’re planning on applying for a loan, try to pay down current debts so that your debt-to-income ratio is in good shape before you start looking for a new loan. Paying down your current debts can also help improve your credit score.

When making decisions about how much to borrow, always make sure the payment amount will fit comfortably into your budget. Regardless of other factors, it’s essential to ensure that you can make the payments on what you’re borrowing without stretching your finances to the breaking point.

Understanding Interest Rates

The interest on a loan is the amount that you’re paying the lender to use their money. Interest rates are stated as a percentage and can vary depending on factors like the loan term, your creditworthiness, the type of loan you’re getting, and more. Interest accrues on the loan for as long as you’re paying it off and is based on the amount of the principal that you still owe.

As you make payments, the amount of the principal will decrease, meaning the amount you pay in interest gets smaller over time if the interest rate and payment amount remains the same. An amortization calendar can help you see how this plays out over the life of your loan.

There are also different types of interest rates, namely adjustable-rate and fixed-rate. Loans with fixed-rate interest maintain the same interest rate throughout the term of the loan. Loans with an adjustable rate may see the interest rate rise or fall during the loan’s term. While this type of interest rate can be helpful if it falls, it can be devastating if the rate rises beyond your ability to make the payments.

Determining Loan Term Length

A loan that has a set period in which to repay it is known as a “term loan.” The term of the loan is the number of years you have to pay back the money you’ve borrowed, regardless of interest rates or other considerations.

Larger loans tend to have longer terms, while smaller loans are expected to be repaid more quickly. Longer terms generally translate to lower payments and higher interest rates; shorter terms typically have higher payments, but carry lower interest rates. This is because longer loan terms are considered more of a risk for the lender than shorter terms.

Loans can carry terms of one year, five years, 25 years, or anything in between. Loans with long terms are typically larger than shorter term loans; for example, a mortgage for your home will likely be 25 to 30 years, and possibly longer.
Personal loans, on the other hand, may need to be repaid in as little as 12 monthly installments, or one year. The loan term for which you qualify can be based on a number of factors, but the most prominent is often your income and ability to make the loan payments.