Today, our standard of living is tied to both our ability to earn and our ability to borrow money. Most of us, cannot make out of pocket payments and need help to finance some of our purchases, be it a home, a car, equipment, or a family holiday.

One way to do this is on credit. If you are sure that you can pay your credit card bill in full every month, then it is not a bad option for short-term payments. However, sometimes the credit card outstanding has accumulated into a considerable amount. Or you need to buy a big-ticket purchase, with a long-term repayment schedule, running into years. In that case, it is better to consider getting a loan.

Before getting a loan, there are a couple of things to consider. How much/ what size of loan do you want? What is the total interest amount you will have to pay by the end of the loan term? Considering the interest plus the principal amount, can you afford to opt for the amount you want? How long will it take you to pay off the loan, based on what you earn?

One way to arrive at the answers to questions you may have on getting a loan is to use a loan calculator. There are many types of loan calculators from simple to advanced, which can help you calculate all kinds of loans (personal, to auto, to home loans). The most basic of loan calculators is called a__ simple loan calculator__. It allows you to calculate the total payment on a loan, given the rate of interest and duration.

## How To Use A Simple Loan Calculator

So supposing you wanted a $1000 loan. The rate of interest is currently at 6%. You think you will be able to pay back in 5 years. But, before you decide how long you want to take the loan for, you want to know how much the EMI will be if you take the loan for five years or more. You want to compare if lower EMIs will mean that the total amount you pay will increase significantly increased or not.

In this case, you use a basic loan calculator, refer to the link above. Once you click into this, you will reach a page that asks you to input the principal amount, the rate of interest, the number of years. The calculator will give you the total amount of interest you will have to pay for the loan taken. This (total interest) amount added to your principal will provide you with the total amount you will repay ver the period of 5 or 6 or 7 years (depending on what you opt for). You also have the option to see the answer as monthly or annual amounts.

### Sample Calculation

So say you want this $1000 loan, and the rate of interest is six percent, and the number of years you want it for is 5. You input these details, hit the calculate button and the calculator will tell you that your EMI will be $193.33 per month

Another reason to use a loan calculator is that it allows you to compare repayment options. By changing (in the loan calculator) the principal amount or the total number of years, for example, you will get the EMI you are expected to pay. Once the calculator gives you the amounts to be paid, you can create a simple table like below, to allow you to make an easy comparison and arrive at your final decision. The table below gives a change in duration only.

Principal | Rate of interest | Time period | Total interest charged | EMI amount |

$200000 | 6% | 5 years | $1,599.68 | $193.33 |

$200000 | 6% | 6 years | $1,932.48 | $165.73 |

$200000 | 6% | 7 years | $2,271.19 | $146.09 |

## Conclusion

These simple calculators will not stress you with the working and other details, and they will present the final answers you want. If you want more specific information, then some more advanced calculators will also help you to track compounded interest, flexible payback options (say you get a bonus payment and want to use it to speed up the repayment of your loan), etc. For more information on other t__ypes of loan calculators__, you can visit this page.

Loan calculators are there to help you make a prudent decision, regarding what kind of loan you can take, or how much debt you can incur without negative consequences. Knowing how much EMI you are paying per month will also help you plan your monthly budget more efficiently. So before you get that loan, use one of these calculators to help you make your decision. Of course, it is also advisable to speak to a loan officer if you are still confused after using the loan calculators available online.