The monthly calculation and payment of the credit costs offers the borrower a slight financial advantage over the annual payment. Before calculating a loan using a formula or a rough estimate, you should consider which loan type is best for your project. Anyone who has ever taken out a loan knows that this must be repaid and, in addition, the cost of the loan. In most cases, only the interest rates agreed for the loan agreement are taken into account. The loan calculator supports financial planning with detailed repayment schedules and clear statements.

## Effective interest on credit: Calculation of actual costs

If you want to take out a loan, always compare the nominal interest rate of the bonds. But anyone who thinks that the same nominal interest rate always has the same effective interest rate is wrong and should read the following remarks. For the borrower, a number of key drivers play an important role when it comes to the effective return on loans.

Nominal interest rates – all well and good – but: What prices must really attract investors? Ultimately, however, only the nominal interest rate is used and thus not the effective interest rate of the loan. When calculating the effective interest rate for loans, you can immediately see the differences to seemingly identical contracts.

Even though the stated nominal interest rate is the same, the cost of borrowing may still vary. As a borrower, you need to check this if you want to save costs and find the best loan contract for you.

After you have evaluated all the loan costs, you can now calculate the effective interest rate for the loan. The effective interest formula is: The net loan amount is the amount paid out when the loan is taken out. Borrowing costs are the total refundable amount less the net loan amount. This allows you to synchronize many offers quickly and efficiently.

The price of credits can vary widely. This can be a big advantage in longer term loans such as home purchase or mortgage lending.

## Credit calculation: That’s how it works!

You must take the interest calculation and the terms into account when calculating the loan. The total cost of the loan is greater, the greater the amount of interest costs. If the repayment term also increases, the cost of borrowing can increase significantly. As a borrower, you can determine the terms and the loan amount yourself. They only have an indirect influence on the interest rate of the loan, since this is determined by the house bank.

But at the end of these pages, there are four practical tips on how to save your credit costs. When you take out a loan, you can significantly reduce the loan amount by following these four guidelines: Choose the shortest possible term: The longer the loan term, the lower the total interest cost. For example, if you’re financing \$ 10,000, you can save up to \$ 500 or more by switching maturities from 84 to 60 years.

Rate protection insurance can only be concluded with a high loan amount: The installment insurance can massively increase the total loan amount. For loans over USD 10,000, coverage costs will quickly exceed USD 1,000 over the repayment term. For longer maturities, depending on the job situation, small loans and maturities of less than two years are generally undesirable.

Add a second borrower with a regular salary: The credit rating increases significantly if you place the application in pairs. If both have regular money, the hedge for the house bank is larger and the interest rates fall. That makes the loan cheaper overall. Collateral for the bank: The more collateral a bank has, the less interest it will charge.

For example, if you have a registered mortgage, you can use it as collateral. Four aspects are important in calculating creditworthiness. Decisive for determining the monthly installments or the total costs are, in addition to the loan amount, the terms and the interest rate, but also the repayment type. Loan Amount: The loan amount has the biggest impact on the monthly installments.

As a result, borrowers have a major impact on the monthly burden of the loan sums. The maximum amount of the loan depends on the creditworthiness of the borrower. An unlimited number of loans can not be requested. This ensures that debtors can repay their debt at all. Also, the loan amount should be adjusted by each borrower to the current financing needs.

Maturities: The maturities affect two parameters of the loan. First, it is determined to what extent the total loan amount is divided into monthly installments. On the other hand, the total interest expense depends directly on the maturity. The interest payments are higher, the higher the time period. Therefore, it is generally recommended to set the runtime as short as possible.

Interest: The house bank uses the interest rate to indicate how much interest you have to pay for the desired loan amount per year. By contrast, the annual interest rate includes all expenses associated with the loan. In the banking sector, a distinction is generally made between three common types of repayment.

Here too, identical partial amounts are repaid over the entire duration. However, the portion of interest at the beginning of repayment is greater than the amortization. At the end of the term of office, only the remaining debt remains. The bullet loan is a form of loan in which the borrower pays the loan volume only at the end of the repayment term.

This loan is also suitable for the financing of real estate, if the borrower can be expected with an increased cash payment at a certain time. 3% pa ​​that is 3% interest per year. In this way, an installment credit balance can be calculated: This way an annuity loan is calculated: The monthly installment amount of an annuity loan is determined by the annual pension.

This is the value to be repaid annually, including interest to the house bank. If you only want to calculate the monthly rates, you get the following formula: Zn = total number of monthly installments. This calculation takes account of the fact that the portion of the repayment decreases with increasing maturity, while the portion of the repayment increases.

## When calculating the loan, you must first look at the terms, the total loan amount and the interest.

However, there are other factors that affect the cost of credit: Annual percentage: Always check if the house bank expects the annual percentage. The annual percentage of the fee also serves to determine the pension.

Settlement fee: Many credit institutions charge a handling fee for the granting of loans. However, please check whether the processing fees of the respective Landesbank are even creditable. The Federal Court of Justice ruled on this in 2014 and found the fees for many loans invalid. Flexible interest: Building loans often offer the chance of variable interest rates.

This can be useful to borrowers when falling interest rates are expected. Even in the case of mortgages, it is important in the low-interest phase to use the longest possible fixed interest rate. The monthly tariff is calculated by three parameters: Credit amount: Which amount should be co-financed? Duration: How long should this funding be?

Interest: What is the interest on the loan amount? First, the interest charge is calculated for each due date. The interest is then added to the net loan amount and divided by the terms. This leads to the monthly interest. This could be a repayment plan for a USD 10,000 loan repayable at a monthly installment of USD 600 at an annual interest rate of 4%.

With this loan, more interest payments are made at the beginning than at the end of the term.  The total amount of the loan in this example is USD 10,305.80. Lowering the monthly rate to USD 400 would increase the cost of credit by more than USD 150. So you know quickly how much capital you need for the desired loan amount in the month and how the monthly rates change at lower interest rates.

Calculate Loans on the Internet with the Simple Loan Calculator: If you want to take out a loan to auto-finance or reschedule your debts, this loan calculator will help you. For example, you can use the monthly rate shown to determine whether you need a longer-term loan term in order to raise the required loan amount.

At the same time, in the representative example, the total loan amount of the relevant service provider is used as a basis for calculation. It calculates the loans according to the location of the property, the type of financing, the repayment rate and the fixed interest rate. When comparing loans you will see different offers. They are arranged by the monthly rate and the annual percentage.

Using the home savings calculator, you can create your financing and repayment plan in advance, giving you a head start on credit with the house bank.