 # Calculate Personal Loan – The 3 Most Important Calculations Explained

Calculate personal loans refers to the different factors you need to calculate to better understand the loan you are requesting. The 3 most important factors to calculate personal loans are the annual interest, the cost of financing and monthly installments. By calculating these 3 factors, you can find out if the loan is right for you and if you really want to take it. In this article we will explain the necessary formulas to calculate personal loans.

If you prefer to calculate the average interest and amounts to which you apply according to your credit history, check our personal loans guide. Sometimes these formulas can be a bit difficult so if you prefer you can contact one of our agents to help you calculate and get loans for free or you can also use this loan calculator. It is a good idea that even if one of our agents help you or use a calculator, read the article so that you can understand the most important calculations of a loan.

### Annual Interest – Calculate Personal Loan The annual interest you are offered depends on your credit record, the amount you are requesting and the lender. To calculate how much you will be paying annual interest, you will need the following information: The amount of the loan, the cost of financing and the term of the loan. Use the following steps to calculate your personal loan:

1. Divide the cost of financing by the amount of the loan.
2. Multiply the result by 365 (To get the annual interest).
3. Divide the result for the term of the loan.
4. Multiply the result by 100 to get the percentage.

Example: If you receive a loan of \$ 3,000 and pay \$ 500 of interest for 10 months. How much was your annual interest?

1. Divide \$ 500 for \$ 3,000 which gives 0.166
2. Multiply 0.166 by 365 which gives 60.833
3. Divide 60,833 by 300 (since the loan is for 10 months) which gives 0.2028
4. Multiply that by 100 which gives 20.28% which would be your annual interest or APR.

### Payment Fees – Calculate Personal Loan The payment installments refer to the amounts that you must settle on each payment date in order to maintain a good state with your lender and with your credit record. These fees can be monthly, weekly, every two weeks, etc. It all depends on your type of loan and your lender. In order to calculate the loan payment installments you will need the total amount, term, interest and loan terms being requested.

The formula for calculating payments is as follows:

Loan Payment = Loan Amount / Discount Factor

You will need the following information:

• Number of payment periods (n) = # of payments per year multiplied by the number of years.
• Interest for the period (i) = Annual interest divided by the number of payments per year.
• Discount factor (D) = {[1 + i) ^ n] – 1} / [i (1 + i) ^ n]

Example: If you borrow \$ 4,000 to 35% for 2 years with monthly payments, what is your monthly payment?

n = 24 (2 years for 12 months since the payments are monthly)

i = 0.029 (35% expressed in decimal is .35 divided by 12 since the payments are monthly)

D = 17.12 ({[(1 + 0.029) ^ 24] – 1} / [.029 (1 + .029) ^ 24])

P = Loan Amount / Discount Factor = \$ 4,000 / 17.12 = \$ 233

Your monthly payments of a loan of \$ 4,000 with 35% for 2 years with monthly payments would leave you with a monthly payment of \$ 233 .

### Cost of Financing – Calculate Personal Loan The cost of financing refers to the total cost you will have to pay in order to receive the loan. The cost of financing includes interest on the loan plus other charges, such as the loan granting fee. In order to calculate the cost of financing the loan you will need the total amount, term, and interest of the loan being requested. This calculation is easier when you already have your annual interest and your payment fees.

Using the previous example: What is the financing cost of a loan of \$ 4,000 to 35% for 2 years with monthly payments of \$ 233 and with a \$ 100 grant charge?

• Multiply the monthly payment by the number of months (\$ 233 for 24 which gives \$ 5,592).
• Add to the total amount that you would have to pay for any extra charge (Loan granting fees, etc. in this case \$ 100).
• Subtract the total amount for the principal amount of the loan (\$ 5,692 minus \$ 4,000 which gives \$ 1,692).

The total cost of financing for this loan is \$ 1,692 or \$ 70.5 per month.

### Calculate Personal Loan With Herne the Hunter Calculating the different factors of a loan can be complicated, so Herne the Hunter offers free help calculating and comparing personal loans so you can be sure that you are making the best decision with your personal finances. Getting help from Herne the Hunter takes 2 minutes of your time and helps you compare more than 100 loans at a time to find the loan you need at the lowest possible interest. We help you get loans up to \$ 100,000 from 4.99% interest even if you have bad credit. If you need help from one of our agents do not hesitate to schedule your free consultation with Herne the Hunter now.