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    You are at:Home » How Can I Calculate The Real Cost Of A Personal Loan?
    Finance

    How Can I Calculate The Real Cost Of A Personal Loan?

    rick johnsonBy rick johnsonSeptember 26, 2022No Comments4 Mins Read
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    Before taking a Personal Loan, you should always ask one question before any other: “what exactly is the actual cost of a Personal Loan?” When you go for a Personal Loan, or any loan for that matter, financial institutions usually impose certain fees, such as interest rates, processing fees, etc. Most overeager borrowers only consider the interest rates but should also consider other extra charges before devising a repayment plan.

    How to Make Personal Loan Payments

    People want to buy houses, luxury cars, and so on, but not everyone is fortunate enough to have the funds to do so. Instead, they opt for a loan. For example, you use a loan to purchase a home, vehicle, or other expensive items. 

    Before applying for a loan, consider these charges to understand the real cost of a Personal Loan.

    Interest Rates

    When obtaining loan quotes, the first point of concern is the rate of interest. The interest rate typically ranges between 14.99% and 24.99%, depending on your eligibility and creditworthiness. Essentially, the corpus of interest on a Personal Loan can equal almost 10% of the total loan amount.

    Processing Fees

    The processing fee is subject to a maximum of 2% of the loan amount, which is the administrative cost of processing the loan application. It is non-refundable, which means you will not get the processing fee for Personal Loan back even if the financial partner rejects your application.

    Prepayment or Foreclosure Charges

    If you are willing to close your Personal Loan account (in full) before the term ends, the lending institution will impose prepayment or foreclosure charges against the outstanding loan amount. Most financial partners, however, have a 6- to 12-month lock-in period.

    Loan Cancellation

    If you wish to cancel your loan application post disbursal, the financial partner will charge a loan cancellation fee, which varies based on your preferred lending institution. So, it will be best to be certain before applying for a loan.

    Repayment Switch

    Many financial partners allow you to switch between the available repayment options, so a fee is charged for this.

    EMI Bounce Charges

    Lending institutions send alerts to ensure sufficient funds are available in your accounts before the EMI due date. The lending institution will charge a penalty if you don’t have the minimum balance to proceed with the EMI payment.

    As a result, conduct thorough check-ins before making a final decision. The following is the formula for calculating Total Loan Cost:

    (L * R * (1+R)n*F) / ((1+R)n*F-1)

    Wherein,

    • L denotes the loan amount.
    • R is the annual interest rate.
    • N is the number of repayment periods required for the loan.
    • F is the frequency of your interest rate.

    Instead of manual calculations, use an online Personal Loan calculator to know the total cost of the loan, which is the total amount paid versus the total amount borrowed, with the difference being interest payment.

    Conclusion

    Before you take a Personal Loan, you should understand how much the monthly payments will actually cost you and whether your budget can comfortably accommodate the additional expense.

    You are not simply repaying the principal when you borrow money from a financial partner. Interest, the cost of borrowing money, will all be included in the monthly instalments. Additional fees may be associated with the loan, like processing fees for a Personal Loan.

    Use an online total loan cost calculator before submitting your loan application to help you understand what your payments might be. This calculator applies to all loans with a fixed interest rate, such as home loans, student loans, car loans, education loans, etc. This calculator will compute the instalment amount and the total loan cost by multiplying the instalment amount by the years and frequency of payment.

    Remember that strategies such as not borrowing more than you need and paying off your loan early can help you save money on payments over time.

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    Oliver James is a UK-based professional blogger, content writer, and content marketer who writes about travel and tourism, finance, real estate, and other topics on his blog. Passionate about writing, traveling, and getting the best deal on everything he buys, Oliver also writes for customers and helps them publicize their products, and services in the US and UK markets. He is a traveler who has visited over 35 countries and loves his job because it gives him the opportunity to find stories, experiences, and places which he can share with his readers. Oliver James is a professional blogger, content marketer, traveler, and electronics enthusiast. He started blogging in 2016 and has become a contributing writer for several blogs, including Android Authority and Elecpros. Oliver has also published his own informational books with Kindle Direct Publishing on subjects like Flappy Bird and Google Cardboard. Also Read: > all inclusive holidays > Lumber Takeoff Services We are Content Writing Agency Australia. We are a team of creative writers, passionate storytellers, and dedicated content creators committed to producing high-quality written pieces that capture your business’s unique voice. Our mission is to provide engaging, meaningful content that resonates with your target audience and helps you reach your goals. Tech Articles Sample: macOS Ventura | Sony Xperia 1 IV | iPhone 14 VS iPhone 14 Pro | iPhone 13 VS iPhone 14 Educational Articles Sample: Radio communication protocols | Create computer software | Difference between Deep web & Dark web | Difference between software & an app | Blackboard DCCCD Sport Articles Sample: Carrom History | Swimming History | Arnis History | Dog Surfing History | Extreme Ironing History | Sepak Takraw History Kate Johnson is a content writer, who has worked for various websites and has a keen interest in Online Signals Report and Stock portfolio generator. She is also a college graduate who has a B.A in Journalism. Read More: Fin Scientists >> Read More: Stocks Signals Mobile App >> Read More: Crypto Signals >> Read More: Crypto Trade Signals App >> Read More: Trade Signal Buy and Sell

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