Loan Calculator

To find the interest rate, amortization schedule, and repayment plan for bonds, traditional amortized loans, and deferred payment loans, use the free loan calculator.

Loan with Deferred Payment: One Large Payment Due at Loan Maturity

This category includes a large number of short-term or commercial loans. These loans have a single, sizable lump sum that is due at maturity, in contrast to the first calculation, which is amortized with payments dispersed evenly across their lifespan. This computation only applies to loans that have a single payment of full principle and interest due at maturity, while some loans, like balloon loans, may also have smaller regular payments over the course of their lifespan.

Bond: Fixed One-Time Payment Due Upon Loan Maturity

Rarely is this type of loan issued outside of bonds. Technically speaking, bonds function differently from traditional loans in that, at maturity, borrowers make a fixed payment. If the borrower does not default, the issuer (borrower) will pay the face, or par value, of the bond when it matures. The amount received at maturity is known as face value.

Coupon and zero-coupon bonds are two popular bond kinds. Lenders base coupon interest payments on a portion of the face value of coupon bonds. Coupon interest is paid at pre-arranged periods, typically once a year or once every six months. Direct interest payments are not made by zero-coupon bonds. Rather, bonds are sold by borrowers at a significant discount to face value, and the face value is paid when the bond matures. Users should be aware that zero-coupon bond computations are performed by the calculator above.

The value of a bond will change after it is issued by the borrower due to a variety of circumstances, including market forces and interest rates. The market price of a bond can fluctuate throughout its life, but this has no effect on the bond’s value at maturity.

Basics of Loans for Borrowers

Rate of Interest

Interest, or the profit that banks or lenders make on loans, is a component of almost all loan arrangements. The percentage of a loan that borrowers pay back to lenders is known as the interest rate. Interest is paid on top of principal for the majority of loans. The annual percentage rate, or APR, which accounts for both interest and fees, is typically used to express loan interest.

The annual percentage yield, or APY, is the rate that banks often post for CDs, money market accounts, and savings accounts. Knowing the distinction between APY and APR is crucial. The Interest Calculator allows loan applicants to determine the real interest paid to lenders based on their advertised rates. Please visit the APR Calculator to learn more or to perform APR calculations.

The frequency of compounding

Interest generated on both the original principal and interest accrued over time is known as compound interest. In general, the total amount owed on the loan increases with the frequency of compounding. Compounding happens every month for the majority of loans. To find out more or perform calculations involving compound interest, use the Compound Interest Calculator.

Term of Loan

The length of a loan, assuming monthly minimum payments are made, is known as the loan term. There are numerous ways in which the loan’s structure might be impacted by its length. Longer terms typically result in higher interest rates over time, which raises the overall cost of the loan for borrowers while lowering the amount of periodic payments.

Loans for consumers

Consumer loans can be classified as either secured or unsecured.

Loans with security

A secured loan is one in which the borrower has pledged an asset as security prior to receiving the loan. A lien, which gives the lender the right to keep another person’s property until a debt is settled, is granted. Stated differently, the loan issuer will have the legal right to take possession of the collateralized asset if the borrower defaults on a secured loan.

Mortgages and vehicle loans are the two most popular secured loan types. In many cases, until the secured loan is paid in full, the lender retains the title or deed, which serves as a representation of ownership. When a homeowner defaults on their mortgage, The property is typically foreclosed by the bank. However, failure to make loan payments can result in the car being repossessed by the lender.

In general, lenders are reluctant to make huge, risk-free loans. Since the borrower runs the danger of losing the asset they pledged as security, secured loans lower the likelihood that they would default. The borrower may still be responsible for the remaining balance if the collateral is worth less than the existing amount.

For people who wouldn’t be eligible for an unsecured loan, secured loans may be a better choice because they often have a higher acceptance rate than unsecured loans.

Loans Without Security

An agreement to repay a loan without collateral is known as an unsecured loan. Since no security is required, lenders want a means of confirming the borrowers’ sound financial standing. This can be accomplished using the five C’s of credit, a popular method that lenders employ to determine a borrower’s creditworthiness.

• Character—may comprise a borrower’s employment history, income level, credit history and reports that highlight their past performance in meeting financial commitments, and any unresolved legal issues.
• By comparing a borrower’s debt to income, capacity calculates how likely they are to be able to repay a loan.
• A down payment, savings, or investments are examples of additional assets that debtors may possess in addition to their income that can be utilized to satisfy a debt obligation.
• Only secured loans are subject to collateral. Anything pledged as security for loan repayment in the case of a borrower default is referred to as collateral.
• Conditions—the lending environment as it stands right now, market trends, and the intended use of the loan

Compared to secured loans, unsecured loans typically have higher interest rates, smaller borrowing limits, and shorter repayment durations. For unsecured loans, lenders may occasionally demand a co-signer—someone who promises to repay the borrower’s debt in the event of default—if they believe the borrower poses a risk.

Lenders may use a collection agency if debtors fail to repay unsecured loans. Companies that collect money for past-due payments or accounts in default are known as collection agencies.

Student loans, personal loans, and credit cards are a few types of unsecured loans. For additional information or to perform calculations involving each of them, please visit our Student Loan Calculator, Personal Loan Calculator, or Credit Card Calculator.