Before subscribing to a personal loan, it is essential to calculate the monthly payments that will have to be made. This is the condition sine qua non for budgeting the repayment of the personal loan. Applying the appropriate calculation method makes it possible to know which amount to borrow according to the desired duration. The repayment of a personal loan involves taking into account one’s own credit possibilities.
How to calculate the monthly payments of a personal loan?
To calculate the monthly payments (m) of a personal loan , several data are to be taken into account. The following simplified mathematical formula should be applied:
M (monthly payments) = c * t / (1 – 1 / (1 + t) ^ n)
* symbolizes multiplication and ^ power
Take the following example:
Borrowed capital (C): € 4,000
Annual rate (T): 3% (or 0.03), which is a monthly rate (t) that is equal to T / 12 (0.0025);
Duration of credit (power n or ^ n): 48 months
In this case, each monthly payment will be 89 €.
The repayment of a personal loan takes into account, for the calculation of the interest on the loan, the capital remaining due. This decreases over the months since each monthly payment consists of a portion of the interest and a fraction of the capital borrowed.
Use a credit calculator
The refractory to mental arithmetic or mathematical formulas have a reliable and quick solution to calculate the monthly payments depending on the duration of the desired personal loan and the amount borrowed. The borrower must be able to support until the last deadline the financial burden that the credit represents.
The online personal loan calculator takes into account the borrowed capital, the interest rate and the duration of the loan. It also takes into account the capital left over in order to provide the user with a result that is as accurate as possible.
Thus, it is possible to know what credit duration to choose according to the desired capital, and this in a few seconds. It is therefore fast to build different scenarios before finding the best ratio amount/duration that is.
Online banks generally have their own calculator available, which allows the consumer to compare what the banks are offering in terms of the amount to borrow against a term. Just specify:
- The desired amount of credit;
- The interest rate ;
- The duration of the credit, generally between 12 and 60 months.
After validating his choice, the user can have a comparative of the cheapest personal loans of the market. It is then sufficient for him to opt for the solution that suits him best, that is to say for the one that is most suited to his ability to repay.