Are you wondering how to choose the best loan offer? The loan calculator will help you. It is a very simple tool that will allow you to estimate the cost of credit and the amount and amount of monthly installments. The first loan calculators were created a long time ago, and they gained the most popularity in 2005-2007 during the economic boom. At that time, Poles most often used mortgage loan calculators, which resulted from the revival on the real estate market. With the calculator, you can calculate the parameters of each type of loan. This is very important help when making the final decision to take out a loan. Although the results should be treated as estimated, they are, however, much similar to the bank’s final offer. Borrowing is a very serious financial commitment that will rest on our shoulders sometimes for many years. So let’s make every effort not to regret our decision.
How to use the loan calculator?
First of all, before you can make calculations, you need to enter the appropriate data. First, we need to determine the amount we want to borrow. This is the basic parameter of every loan. Then enter the nominal interest rate that the bank gives on an annual basis. We also need to specify what interest period we are interested in. In order for the calculations to be reliable, it is also necessary to determine the form of installments – whether it is to be decreasing or permanent. It is worth remembering that a good calculator is able to calculate the installment and costs of each type of loan.
Of course, it should also be borne in mind that the loan calculator will only provide us with “dry” results, without any comment. How we interpret these results largely depends on our economic knowledge. Although this is rather basic knowledge of finance, so we should handle the correct reading of the results from the calculator. Sometimes these results can be disturbed by incorrectly entered data. This is the case, for example, with the mortgage calculator, when we lower the costs of building a house or buying a flat.
How to choose the best calculator
Which calculator is best to use? It should be noted that there are plenty of websites with credit calculators on the Internet. However, not all of them are fully professional. It is worth checking if the given calculator has a clearly defined instruction manual. You should also see information that the calculator data are estimates and are for illustration only. To choose the best calculator, it’s also worth using the opinions on the internet, which you will find on numerous forums and discussion groups on Facebook. You can always use the hints of trusted friends. A loan is a very serious commitment, so it’s worth counting everything well before you get it.
Loan interest rate
One of the amounts to be entered in the loan calculator is nominal interest, which, according to the Act, may not be higher than four times the lombard rate set at the National Bank of Poland. Banks provide the interest rate on an annual basis. There are two types of interest in credit practice: fixed and variable.
Fixed interest is characteristic for short-term loans. A fixed amount applies throughout the duration of the loan agreement. The repayment schedule is also the same. The situation is different in the case of variable interest rates. In this case, we are dealing with a fixed part of the interest rate (margin) and a variable part, the size of which is shaped in relation to some indicator. Most often it is WIBOR, i.e. the interest rate applicable on the interbank market. Therefore, the variable interest rate can be very beneficial for the borrower when the Monetary Policy Council cuts interest rates. Then the interest rate on the loan decreases.
The loan calculator should also specify what type of installments we are interested in: equal or decreasing. Equal installments maintain a constant amount throughout the loan period. The installment includes our debt and interest. At the beginning of the loan, we pay back more interest and less capital. Over time, these proportions are reversed.
In the case of decreasing installments, the situation is slightly different. The installment amount decreases over the loan period. This is because the interest accrues from the outstanding capital, which over time is becoming smaller. Decreasing installments are therefore a much more beneficial solution for the borrower. It is also worth noting that the loan duration is influenced by the loan period. The longer it is, the smaller the monthly installments can be. Installments can be very high for short-term loans.