Instructions
1.Write down the loan amount. This must be the actual amount of money you want to borrow, not the total payback amount. Lenders are required to tell you the total amount you will pay back over the life of the loan, but this includes interest, so don't list the payback amount. List the principal only, which is the actual amount you borrowed.
2.Record the monthly payment amount. This is sometimes called the EMI, which is the equated monthly installment. You can use an estimate for your monthly payment amount, based on what you would like to pay. Determine how much extra money you have in your household budget for loan installments, and assume for the purpose of making calculations that this will be your monthly payment.
3.Write your interest rate on your page of figures. You should call several lenders and determine what rates may be available to you. Don’t choose the most favorable rate for your calculations. Choose a rate that is the average of all rates quoted to you. This will give you a figure that is most likely to be close to the rate you will actually get.
4.Use a free online calculator to determine the total number of payments you will have to make (see References). Many mortgage companies and other lenders offer free calculators that allow you to enter your figures and determine the total number of payments you will make. The calculations can be done by hand, but these calculations require knowledge of logarithms. The calculators have the logarithms already entered in the software for you. Enter the loan amount, the monthly payments and the interest rate, and the calculator will tell you how many payments you will have to make.
