Loan Calculator

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Loan calculator

Every major life decision is accompanied by a loan, it seems. Loans help us pay for college, afford our cars, and fund our dream homes, allowing us to accomplish goals that otherwise would have seemed impossible.

Loans can also be complicated: jargon can be inaccessible, and the process for getting a loan can feel opaque. To help you navigate the basics of getting a loan, we created a loan calculator that can help you figure out how loan payments are calculated and whether or not you can afford it. 

Our loan calculator outlines what you can expect your monthly payments to be, based on the loan amount, term, and interest rate. Try it out and see what’s best for your budget.

Loan Types

Mortgages 

A mortgage is a loan used to pay for a home without fronting the entire cost at once. Most home buyers take out mortgages to afford their homes. Typically, mortgages require down payments (the more you pay upfront, the lower the interest rate and monthly payment), and you make a monthly mortgage payment, which pays down the principal and interest, for 15 or 30 years until the home is paid off in full.

Home Equity Loans

Also known as a second mortgage, a home equity loan is a lump-sum payment that you repay over a fixed term, using your home as collateral. The amount you can borrow depends on the available equity you’ve accumulated on your home — typically up to 85% of equity. This loan can be used for debt consolidation, home improvement, or other big expenses. If you default on the loan, though, the bank could seize and foreclose on your home.

HELOCs

A home equity line of credit (HELOC) uses the available equity on your home to fund big expenses (such as college tuition or a home repair) or consolidate debt, similar to a home equity loan. The main difference is a HELOC is a revolving line of credit, like a credit card with a high limit, and not a loan. A HELOC can potentially be risky, as your home is the collateral and can be seized if you default on the loan. Due to the COVID-19 pandemic, major banks like Bank of America and Wells Fargo have tightened lending standards around HELOCs.

Auto Loans

Simply put, auto loans are taken out to pay for vehicles if you can’t afford the total cost upfront. With these loans, which are offered by banks and auto dealers, the car you’re purchasing is the collateral. Auto loans require a down payment, which can offset the interest rate you pay over the lifetime of the loan. The term usually varies between 36 and 72 months, and interest rates hover around 3-5%. Many personal finance experts recommended taking out an auto loan only if you’re well-positioned to pay it off over 36 months.

Student Loans

According to EducationData.org, 44.7 million borrowers owe a total of $1.6 trillion on student loans. Provided by federal and state governments and private lenders, most student loans allow a grace period of six months after graduation or dropping to below half-time enrollment. After that, fixed payments are due each month. At this time, federal student loan payments have been suspended until Sept. 30, 2020, due to the pandemic. You can pay them down if you’d like, but not paying won’t ding your credit history.

Personal Loans

Known for their versatility, personal loans can be used to pay for home repairs, home renovations, weddings, vacations, funerals, and other large expenses. Most commonly, though, people take out personal loans to consolidate high-interest credit card debt onto a lower interest rate with friendlier payment terms. Most personal loans are unsecured and do not require collateral.

How Long Will It Take to Pay Off My Loan?

How long it takes to pay off your loan will depend on the term length you choose and how much you are able and willing to pay each month. Generally, your loan payments should not exceed more than 5% to 10% of your monthly budget. Each payment goes toward repaying the principal (the original amount borrowed), plus interest. 

Say, for example, you take out a $20,000 personal loan for a home repair project. If the maximum amount you can afford to put toward your loan repayment each month is $370, then you may be able to pay off the loan in 5 years, assuming a 4% fixed interest rate. If you can’t afford more than $200 per month on that same loan, then you’ll need to either take out a smaller loan or repay over a longer period of time. It’s all a balancing act of what you need, what you’re offered, and what you can afford.