Loan Repayment Calculator and Payment Plan Guide

Whether it's a home, a car, or a personal loan, analyzing costs correctly before borrowing is critical for your financial health. In this guide, we will examine how loan installments are calculated, the effect of interest rates, and how you can minimize the total repayment amount.

Loan Calculation Logic

Banks usually use the "Equal Installment" (Annuity) system when lending. In this system, although the amount of the installment you pay every month stays the same, the ratio of principal and interest within this amount changes over time. Initially, a large part of your payment goes to interest, while towards the end of the term, the principal payment increases.

Factors Comprising Loan Cost

Principal: The net amount withdrawn.
Interest: The cost of using the money.
Taxes: Legal taxes applied to the loan (common in personal loans).
Fees: File fees, life insurance, and appraisal fees.

How is Monthly Installment Calculated?

Mathematically, the monthly installment is found with the following formula: Installment = [Principal * Interest * (1 + Interest)^Term] / [(1 + Interest)^Term - 1]

Here, "Interest" represents the monthly interest rate, and "Term" represents the total number of months.

Instead of dealing with this complex formula, you can create your payment plan instantly using our Loan Repayment Calculator.

Things to Consider When Using a Loan

1. Annual Percentage Rate (APR)

Don't just look at the monthly interest rate; look at the Annual Percentage Rate, which includes all fees. This rate shows you the real cost of the loan.

2. Term Selection

Extending the term lowers the monthly installment but significantly increases the total interest amount you will pay to the bank. It is always more economical to choose the shortest term your budget allows.

3. Flexible Payment and Early Closing

Be sure to find out if you have the right to close your loan before its term or make interim payments, and if so, the cost of it.

Frequently Asked Questions

Does a loan application affect my credit score?

Making multiple loan applications in a short period can negatively affect your credit score. It is recommended to check your budget with calculation tools before applying.

Can I restructure my loan if interest rates drop?

Yes, banks usually allow you to restructure (refinance) your loan at current interest rates for a certain fee.