Interest Rates Calculator
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
An interest rate calculator is an excellent tool that helps consumers determine whether they can afford to take a loan at the interest rate offered by a lender. The interest rate calculator is generally simple and requires the following user inputs to determine the likely monthly payment:[br]
-
Total loan amount
-
Offered interest rate
-
Length of the loan
Interest Rates Calculator: Various Uses
While the most common use of an interest rate calculator is to estimate monthly payments, it can be used for various other purposes such as:
-
It can be used to compare interest rates offered by various lenders. This can help individuals finalize on the best possible loan provider.
-
It can also be used by individuals to calculate the monthly payments they may have to pay for different loan amounts. This would help them decide on the optimal loan amounts.[br]
Interest Rates Calculator: The Limitations
Online interest rate calculators work on several assumptions such as:
-
Length of a month: All months have the same number of days. However, interest on loans may accrue on a daily basis. This may lead to a variation in the interest on a monthly basis, depending on the number of days in the specific month.
-
Number of weeks and fortnights in a year: An online calculator assumes that a year has exactly 52 weeks or 26 fortnights. Based on this calculation, a year should have 364 days instead of the actual number of 365 or 366 (leap year).
-
Rounding of the amount in each repayment: In practice, when you make a repayment, you round off the amount to the nearest cent. However, online interest rate calculators use the actual repayment amount (without rounded off) while deriving the amount of interest payable at various timeframes along the graph. This same method is used to obtain the interest you would need to pay over the entire term of the loan. Although this assumption enables the calculator to generate a smooth graph, it may produce a result that is different from what you ultimately pay.
