The loan calculator doesn’t tell the whole truth

Before applying for a loan, it is a good idea for the borrower to plan for a loan repayment. To help you with this, there are many different types of loan calculators available online. The loan calculator can be used to calculate the interest costs of a loan and the monthly installments to be repaid.

A loan calculator can be found on almost every website that offers a loan. For example, each bank’s website has a Loan Calculator that can be used to calculate eg. the size of the mortgage repayments and the loan period.

Actual cost of the loan

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The actual cost of a loan, ie the annual percentage rate of charge, is influenced by the cost of the loan. These costs include account management fees, account opening fees, and other loan servicing costs, such as billing fees and other possible costs. In addition to the costs, the effective annual interest rate will of course include the nominal interest rate of the loan and possibly the margin of the bank or financial institution. These items constitute the effective annual interest rate of the loan.

The definition of nominal interest rate is, according to Wikipedia, the interest rate excluding the effects of inflation or deflation. The nominal interest rate is the interest rate set by the lender for the amount borrowed. It does not take into account the other costs of the loan, unlike the annual percentage rate of charge.

When comparing interest rates and costs on loans, it is worth considering which one is the nominal rate or the annual percentage rate. There is a big difference between the two above. Many loan calculators show the nominal interest rate of a loan and do not take into account the actual cost of the loan. Many loan counters do show the actual APR, so you should look closely at what the counter actually looks like. Here’s an example of a loan calculator that shows the actual annual interest rate on a loan.

The loan counter does not make a loan decision

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The loan calculator does not decide on the interest rate of your loan, but it allows you to calculate and plan the loan period and loan amount and repayment that suits you. Each bank and financial institution makes a loan decision based on information provided by the applicant to the bank or financial institution. The loan offer is always personal and is influenced by many factors.

Factors affecting the loan offer include: the borrower’s income and expenses. Expenditure includes living, living and repaying any other loans. In addition to the above, banks and financial institutions assess the applicant’s financial situation as a whole. Regular employment and thus regular income make it easier for the applicant to obtain a much cheaper loan.

In addition, depending on the size of the loan, banks and financial institutions may require collateral for the loan. For example, a home loan always serves as a collateral for the loan. Usually smaller loans up to € 60,000 can be obtained without collateral. If the borrower has a default payment, this almost always means that the loan cannot be obtained at all.

Thus, the loan calculator allows the borrower only to plan and calculate the loan repayment period and the amount of loan repayments. The loan calculator does not make a credit decision, so if you want to find out the real cost of a loan and the size of the installments, you should apply for a loan. Applying for a loan does not bind you at any time. Applying for a loan is like being able to really test your own creditworthiness in the eyes of banks and financial institutions.

Facts about calculating the APR

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The annual percentage rate of charge is a key indicator for easy comparison of interest rates on loans. It describes the annual percentage rate of the loan and includes interest and other costs and charges on the loan, such as billing fees and account management fees.

The EU directive requires that the actual annual interest rate of the loan is stated in the loan notices. Most lenders do this, but as I mentioned earlier, not everyone does. Some loan calculators, often for very small loans, calculate the cost of the loan at a nominal interest rate only.