Here is how to Pick the Best Auto Loan Calculator Website!
Acquiring an automobile is a dream that is nurtured by almost everyone. And when the right time comes, careful thought and planning need to go into it every step of the way.
A big part of planning the purchase includes the money at your disposal and how you’d go about paying off the loan that you took out, for it. To assist you in the process are websites that can give you an analytical synopsis of what you are spending and how you will be expediting payoffs every month.
Nevertheless, before applying for a loan, there are a few thumb rules and terminologies that an auto loan website would use that you need to understand. The thumb rules first:
Loan Amount: Always make sure that you borrow only what you can repay. Ensure that your debt is low enough for your income to pay off every month.
Loan tenure: Smaller installment amounts paid every month would mean a longer loan tenure and higher interest rates whereas higher installment amounts would translate to lower interest rates and a short loan tenure
Loan installments: A borrower that does not ensure the debt to income ratio as mentioned in the first point would sooner or later end up defaulting on the loan. Always remember that your monthly payment should not exceed more than 50% of your income.
A very common terminology that all websites use is called the EMI or the Equated Monthly Instalment. Basically, the EMI is explained as a fixed payment amount that a borrower has to pay every month against the total loan taken. The EMI comprises of 2 parts – the principal loan amount and the interest amount.
A good website that helps you calculate your loan should have taken into consideration the following points.1. The EMI or the Equated Monthly Instalment as mentioned above is the most important information that an online calculator on the website should provide as it is fundamental to the decision a borrower has to make.
2. The Breakup Details: The breakup helps the borrower get a distinct and clear idea of where he or she stands financially with regard to the loan. The break up should be able to give you a blueprint of the principal amount, EMI, interest rates, repayment options, processing fees, etc.
3. Amortization Tables: The amortization table will give you a graphic description of the progress made on the loan after you have secured it. It will help you understand and plan how much money you need to anticipate for the rest of the year. It will also show you the amount of money left to be paid as weeks progresses to months and months to years.
How does the EMI calculator work on the website?
There are basically 4 variables in the calculation of an EMI essentially denoted as E, P, r, and n and the calculator uses the formula which looks like E = P x r x (1+r)^n/((1+r)^n -1)
E stand for the amount that you will need to pay every month.
P is the principal amount that you would like to borrow.
r is the rate of interest usually calculated on a monthly basis.
n is the duration of the loan in months. (For example, if it’s a 3-year loan period, the variable entered in the place of ‘n’ would be 36)
Although this is the most common formula a website uses, there are other websites which also include the processing fees into the calculation of the monthly installment. The processing fees are usually a certain percentage levied on the amount borrowed. It is usually decided by the bank or the financial institution to which you applied for the loan. Either way, it would stay in the range of 1% to 3%.
Websites and loan calculators go a long way in effectively giving you a concrete idea on where you stand financially. Adhering to the principles mentioned would help you stay within your budget and have a stress-free loan repayment period.
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