## Different loans, different calculations

When borrowing money, the monthly payments required are usually a primary concern. Is the loan affordable given your income and other monthly expenses? If you are not sure how much you have to pay, a loan payment calculator-or a bit of math-can help you get the answers you need. More commentary at http://www.debtfreechristian.org/paying-off-payday-loans-debt-consolidation-we-consolidate-payday-loans/

Calculators are available for a quick answer. They also make it easy to do what-if calculations that will really help you understand your loan and how your decisions affect your finances. For example, you can compare what happens when you borrow a little less, or what happens when you get a lower interest rate.

## Different loans, different calculations

Before you start calculating payments, you need to know what type of loan you are using. You use a different calculation (or calculator) for different loans. For example, with interest-only loans, you don’t pay debts in the early years – you just “service” the loan down by paying interest. Other loan repayment loans, in which you pay off the loan balance over a set period of time (like a five-year auto loan).

Use a basic Good Credit calculator: For most home and auto loans this Google Sheets calculator will handle the math for you, so you don’t have to do calculations manually.

Create a spreadsheet: You can also create advanced spreadsheets in programs like Google Sheets and Microsoft Excel to do the calculations and show you how the loan works year by year. See more information on a table for using standard amortizing loans (including auto loans, personal loans, and loans).

If that doesn’t work, don’t worry – coverage will result in several other payment calculations here too.

## The formula for Payable Good Credit Payment

This formula is for most amortizing loans, covers most loans-except Good Credit cards and interest-only loans.

Loan payment = amount / discount factor or P = A / D

You must have the following values:

• Number of periodic payments (n) = payments per year multiplied by the number of years
• Periodic interest rate (i) = annual rate divided by the number of payment periods
• Discount factor (D) = {[(1 + i) ^ n] – 1} / [I (1 + i) ^ n]

### Example: Good Credit payment calculation

Suppose you have borrowed \$ 100,000 at 6 percent for 30 years, repaid monthly. What is the monthly payment?

• n = 360 (30 years times 12 monthly payments per year)
• i = 0.005 (6 percent expressed annually as .06 divided by 12 monthly payments per year to learn how to convert percentage to decimal)
• D = 166.7916 ({[(1 + .005) ^ 360] – 1} / [.005 (1 + .005) ^ 360])
• P = A / D = 100,000 / 166.7916 = 599.55

The monthly payment is \$ 599.55. Check your math with an online payment calculator.

## Interest-only Good Credit payment calculation formula

The Good Credit payment calculation for an interest-only loan is easier. Multiply the amount you borrow by the annual interest rate. Then divide by the number of payments per year. There are other ways to get this result.

Example (with the same Good Credit as above): \$ 100,000 times 0.06 = \$ 6,000 a year of interest. 6000 divided by 12 equates to \$ 500 monthly payments.

Provided that you never make additional payments the principal amount to reduce your monthly payment will remain the same. However, you have to pay off that loan a day. For example, you can start making amortizing payments after the first ten years, or you may need to make a balloon payment at some point in order to get rid of the debt.

### Credit card payment calculations

Credit cards are pretty simple too. Lenders typically use a formula to determine your minimum monthly payment. For example, your card issuer might require that you pay at least 3 percent of the outstanding amount each month, with a minimum of \$ 25 (whichever is more). Of course, it is advisable to pay more than the minimum, but that is the amount you have to stay out of trouble.

Example: Suppose you owe \$ 7,000 on your Good Credit card. Your minimum payment is calculated as 3 percent of your balance:

• Payment = MinRequired x balance
• Payment = .03 x \$ 7,000
• Payment = \$ 210

Check your math with the Good Credit Card payment calculator on Google Sheets.

But what happens next month? Your Good Credit card charges interest a month, and you could put more on your card after you make payment. In many cases, the same minimum applies: a percentage of the total loan amount is due.

More details, a tutorial on how to calculate your card payments and how each payment affects the scale.

### Interest and total loan costs

Your monthly payment is certainly important. If you don’t have the cash flow for payments, you can’t afford to buy. But payment isn’t supposed to be the only important part of the deal. It is often more important to focus:

• The amount you’ll be paying in interest over the life of your loan
• Fees you pay to borrow money

Big Picture: These three components combine to make up the total cost of ownership of whatever you buy. But it’s hard to understand exactly how much you pay when you have multiple offers from different sources, that’s where the calculations above come in handy. For example, the amortization calculator adds up the lifetime interest cost of your loan and shows you how much you spend on interest each month.

April: APR is another useful ToolGood Credit cost for comparison. On a mortgage, April accounts for upfront costs (closing costs) in addition to the interest rate you pay for your loan balance. As a result, you get closer to apples compared to apples among the Good Credit givers. But the lowest APR isn’t always the best loan, and the calculations above can tell you why. As a rule of thumb, high upfront transaction fees do less harm to loans that you hold for a long time.

Your monthly payment is only a result of the Good Credit amount, interest rate, and the length of the loan. Sales reps (including Good Creditgeber) can move things around to make it seem like you’re doing a good business, even when it comes down to it when you don’t.

For example, some car dealers want to focus solely on the monthly payment: how much can you comfortably afford each month? With this information, they can sell you almost anything and fit into your monthly budget. But you don’t necessarily have to be a good deal, and the cost of your loan will dramatically increase the total amount you end up paying for your car.

How do you do that? One of the easiest ways to extend the loan over a couple of years: Instead of a four or five-year loan, they will suggest a seven-year loan with lower monthly payments. Unfortunately, stretching out the loan means that you’ll effectively pay more interest over the term of the loan, paying for everything you’ve bought.

You will almost certainly do better if you negotiate on the purchase price rather than relying on a monthly settling payment. You can borrow anywhere you want: from any bank, credit union or online lender. You don’t have to rely on a car dealer for financing. You won’t always get a lower monthly payment this way (so it may not be believing how you can do better), but you will likely spend less overall.

To minimize your costs, pay off your debts early. As long as there is no prepayment penalty, you can save on interest, pay more each month, or through a large flat rate payment. Depending on your loan, your required monthly payments could go forward or not change your Good Credit lender-ask before you pay.

Whenever you calculate your Good Credit payment and costs, you should make a rough estimate of the results. The final details may vary depending on the assumptions your Good Credit giver uses, but you will still get valuable information.