Those who are borrowing money should know how to calculate the payments they will have to make on those loans. There are sadly many who do not have the first clue as to how they are going to do this. Luckily, it is not difficult to learn how to calculate your payments and make plans for actually making those payments and getting the debt behind you.
The first step is to look at the principle amount that you owe. This is the total amount that you have borrowed. That is an important number because it is the base of what you are going to have to pay back. However, it does not stop here. No lender would make any money if they were not charging you interest on the money they lend to you. Thus, the other important number to have handy is the interest rate that you are paying on this loan.
It is vital to know how often the interest is calculated. Is it something that is added to the principle of the loan on a monthly basis, daily, yearly? This matters because interest compounds upon itself and can increase the amount that you have to pay back depending on how often it is calculated into the loan.
Clydesdale Bank is one lender that offers loans to people for all sorts of purposes. Those individuals might be looking to open up their own small business, buy a home, or more. Whatever it is that they decide to do with the money, they need to know how to pay back Clydesdale.
Simply take the amount that you owe as the principle and multiple it by the percent of interest that you are being charged. For example, if you are being charged 5% interest on a Â£10,000 loan would multiple 10,000 by 0.05 to get their answer. They would also need to know if the interest is being computed daily. If that is the case, then the math changes just a little. If the same 5% rate is the annual interest rate, then the individual would multiple 10,000 by 0.05/365 to find out the interest that is tacked on daily. In this example, the individual would be adding Â£1.37 to their total daily at the beginning. That extra interest would earn interest on itself as well, so it is important to pay attention to.
Calculating payments on your loan may seem complicated at first, but it can be done in a matter of minutes so long as you have all of the critical numbers ready to go.
Fiona Harris is a keen finance blogger who writes on various aspects on finance including tools such as loan calculators and also tips on how to save money when borrowing from a bank.