Small business loans are very similar to personal loans, in that they are typically unsecured. That is, there is nothing that guarantees repayment for the lender – nothing that the lender can claim as collateral, should the person or business default on the loan. Instead, lenders will apply hefty fees for late payments, resulting in a bad credit rating for the borrower. It is therefore of crucial importance, whether the borrower is using the loan for personal use or investing in a business, that the agreed monthly payment is a manageable one. This simple calculator is a way to quickly calculate the monthly payment that can be expected from a loan, depending on such input variables as the amount, duration and interest rate of the loan.
How to use it
To use the monthly payment calculator, it is first important that the borrower researches the loan market and obtains quotes as to how much they can expect to pay. The financing market often fluctuates wildly in the space of a few months, therefore be sure to keep an eye on the figures being offered by your chosen lenders. To begin using the calculator, simply add the amount you wish to borrow into the box marked “Loan Amount”, then the duration into the box marked “Months to Pay Loan Off”. This is also useful for those wishing to calculate the monthly payment on an existing loan. Finally, enter the yearly rate into the field labelled “Annual Interest Rate” and then click on “Calculate”.
To see the calculator in action, we can devise an imaginary situation which a person wishes to calculate the monthly payment on an existing loan. This, we can imagine, is a small business loan with an outstanding balance of, let’s say, $12,000. Therefore, to begin with we can add this number into the “Loan Amount” box. Secondly, let’s say that there are 3 years left of the loan’s life: so, we enter this figure as 36 months into the field marked “Months to Pay Loan Off”. Finally, we can set the annual interest rate at 7%, therefore enter this number into the relevant box and click on the “Calculate” button. Given these variables, we can find that the monthly payment for this borrower will be in the region of $370.