Loan Calculator, The monthly payment is not the only you need to know.
Loan Calculator: the monthly payment is not the only number you need to know
loan calculator in euros
Loan calculator
This is a deliberately simple loan calculator to use. Put in how much you want to borrow from the bank, the interest rate you know you will pay and how long you want to take to pay it back.
I built it because I have seen what a loan can do when it is chosen too fast. Many people look only at the monthly payment, and that is not enough. This tool is for people who borrow for the first time, especially young people, and for anyone who feels a bank offer is too complicated. There are other loan calculators online, but they only give you numbers. They don’t tell you why you need them. Here I will try to explain that too.
The monthly payment is useful, of course, but in my opinion the number I would look at straight after that is the Total repayment. How much money I take, and how much money I have to give back. That’s how much money actually leaves your pocket by the time the loan is finished. Of course, you also have to think about inflation, but this is another story.
So don’t just ask “Can I afford the monthly payment?” Also ask “How much am I paying in total to borrow this money?”
See it as an investment. But remember that a loan is not free money. It is a cost, and you should know that cost before you say yes.
Some things I learned the hard way:
Don’t let anyone rush you. I once heard a bank adviser say: “This is the offer. If you don’t accept it, I can’t give you anything else.” If the terms are bad, walking away is a normal answer. A good offer does not need pressure.
Check the currency. Never borrow in a currency you don’t earn. A small move in the exchange rate can make your debt much bigger, and you can’t control it.
Leave a lot of room. I know a man who took a loan with a payment about half of what he could really afford, and he paid it without stress. Today, if I was not completely sure about my income, I would test the loan with 30% to 50% less income than I have now. If it did not work at that level, I would not take it at all. Your family budget is worth more than any purchase.
Quick example
Borrow 10.000 € · 6,00% · 5 years
Monthly payment
193,33 €
Total interest
1.599,68 €
Total repayment
11.599,68 €
When would I use this loan calculator?
When you're looking at a normal loan with regular monthly
repayments and want just a quick reality check for your calculations before getting buried
in bank paperwork.
Comparing two loans
Put both offers through using the same amount and term.
Then compare the monthly payment and total repayment.
Checking a car or personal loan
See what that “small monthly payment” actually adds up
to over four, five or seven years.
Testing a longer term
Change 5 years to 7 or 10. The monthly payment usually
gets nicer. The total interest usually doesn't.
Checking the lender's numbers
If their total is noticeably different from ours, don't
just shrug. Find out what else has been added.
A lower monthly payment can cost more in the end
This is probably the easiest trap with loans. Stretch the loan
and the payment looks much friendlier. But you're paying interest
for longer.
Take the same 20.000 € loan at 7,00%:
23.761,44 €
3.761,44 €
27.866,04 €
7.866,04 €
The second payment is about 164 € lower every month,
which may be exactly what somebody needs. But the same 20.000 €
ends up costing roughly 4.105 € more overall.
That's the trade-off. You have to know it from the verybeginning.
Want to check the maths?
There isn't any secret sauce behind the calculator. For a
standard fixed-payment amortizing loan, this is the formula:
It looks worse than it is. Take our 10.000 € loan at 6,00%
for 5 years.
P = 10.000r = 0,06 ÷ 12 = 0,005n = 5 × 12 = 60approximately 193,33 €.
After that, the basic totals are straightforward:
Total repayment = monthly payment × number of payments,
and Total interest = total repayment − original loan.
One small detail: the calculator keeps more decimal places
internally than you see on screen. So if you manually multiply
the displayed 193,33 € by 60, you can be a few cents away from
the calculator's total. That's rounding, not mystery money.
And something else, 6% interest doesn't mean “add 6% once”
With a normal amortizing loan, interest is calculated on the
outstanding balance. Early in the loan you still owe almost all
the money, so a bigger part of the payment is interest.
As you pay the balance down, the interest part gets smaller and
more of the same monthly payment goes towards clearing the actual
debt. Open View repayment schedule in the calculator
and you can see it happening month by month.
Four numbers I'd check before signing anything
a good month?
the first payment to the last?
the money?
for another two, three or five years?
What this calculator doesn't know
It assumes a standard loan with equal monthly payments and a
fixed interest rate. It doesn't know what extras a lender has
attached to the deal.
Check the stuff outside the interest rate too.
Fees, compulsory insurance, taxes, early repayment charges,
variable-rate conditions and other costs can change the real
cost of a loan. APR or an equivalent effective rate may also
include costs that this basic calculator doesn't.
The calculator checks the maths. You still check the deal.
Compare the result here with the lender's repayment schedule.
If their total is higher than ours, there should be a reason.
Find it before you sign.
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