How Loan Calculators Are Helpful As Financial Planning Tools

What is a loan calculator? That's the first thing to understand. It is a system that helps you figure out the EMI that you would have to pay if you took a quantum of loans.

Now, normally the first thing to decide when taking a loan is the amount required, the tenure of the loan and the resultant EMIs which have to be paid. The loan may be a personal loan on a short term basis, or it could be a housing loan which has a long tenure, upto 15 years.

There are several areas where the loan calculator can help. The first thing is to figure out what the EMs would be for a sum of loan. If there is an amount in mind, filling that amount into the loan calculator and the tenure you have in mind will indicate the EMI. If the amount of the EMI is too much, than the tenure can be increased and the EMI showed by the loan calculator checked. The result will indicate the new tenure in terms of the monthly EMI. Remember that increasing tenure means additional interest being added on. This would increase the overall amount to be rapid. The calculator efficiently works this out. Trying to do this manually is a problem and, at best, may give inaccurate results. Now, working with results which are not correct may lead to problems.

Increasing the tenure and examining the results thrown up by the loan calculator means that you can see whether the EMI suits your budget. The loan calculator can show you all the options once you have entered the figures. Remember that increasing the tenure means that the monthly EMI is lower. But overall, the interest impact is higher. It is tricky to calculate for an average person, and it is best to use the loan calculator.

Some loans like housing involve large sums, and the repayment amount is quite high. The loan calculator lets you figure out what tenure you can safely take by indicating the EMI amount once you have entered the loan amount and the tenure. You can also enter the loan amount and EMI to see the tenure. The ease of usage of the calculator mens that all the permutations and combinations possible can be worked out without going anywhere. Should the housing loan be paid in 12 years or 13 years? If that is the plan, what is the EMI every month? Is this EMI comfortable? This means can you pay it without issues. Is there a safety margin which can take care of unexpected issues? All these can be figured out using the loan calculator.

Consider that you need to pay up every month once you have taken the loan and the EMIs start. And in the case of a housing loan for a very long period. Is your income steady enough to keep the repayment going? The EMI indication from the loan calculator will accurately tell you what the EMI will be before you sign the loan form. Check this carefully against your future earnings. Then make your decision. There can be several events which cannot be foreseen. Are there largish expenses coming up? Marriage expenses for siblings? If such an event is on the horizon, use the calculator to get a safer EMI. One that can be easily met. This way, you won't default on the instrument payments and have your credit ratings lowered.

The other way to use the loan calculator is to figure out how much you can afford to borrow. Inputting an amount you think you want to borrow and the number of months you want to pay off the loan, the calculator will immediately tell you what the EMI will be. Too much? Reduce the amount of the loan and se if this is ok. If not, increase the tenure and see. One of these options will be the right one. Doing these manually is difficult, and the chances of error are too great.

Therefore the loan calculator, which has been designed to give you the best option, is the way to go. There are no fees to use it. All loans, small or big, need o be repaid. It is crucial to use the calculator to figure out the quantum of loan you can afford to take and how long you need to repay it. This needs to be done before you take the loan. Making changes afterwards is a complex and difficult process. This is especially true for the larger housing loans. This requires serious long term planning and understanding of the effect of repaying instalments over a long period of time. Using the loan calculator is the best way to save yourself a lot of grief.