Line of Credit & Loan Payment Calculator
This calculator helps determine your loan or line of credit payment. For a loan payment, select “fixed term loan.” For a line of credit payment, you can choose the amount of the outstanding balance to pay each month or an interest-only payment.
Loans are also typically either secured or unsecured.
Secured loans mean that the borrower has put up an owned asset in exchange for money. This asset is the collateral that the borrower gives up over the loan’s lifetime. When the loan is repaid, in full, the collateral is returned to the borrower. If the borrower defaults on the loan—if they cannot make payments—then the collateral is seized by the lender. In its simplest terms, collateral is something a borrower provides to make a loan more viable for a lender. Mortgages and car loans are common examples of secured loans.
Unsecured loans are just agreements to pay back a loan with no collateral involved. Unsecured loans typically have much higher interest rates than secured loands because the lender doesn’t take any collateral. Credit cards, personal loans, and student loans are the most common examples of unsecured loans.
Interest is the price, the markups, that banks and lenders make on a loan or line of credit. Interest is usually paid in addition to the principal repayment. Interest is either compound or simple.
Compound interest refers to interest that accumulates not just on the principal repayment, but also on accumulated unpaid interest that is owed. Simply put, compound interest generates interest on top of interest, and often results in higher payments overall.
Simple interest, meanwhile, does not compound or build up payment to payment.
Common Uses for Loans
Loans are frequently used to:
- Consolidate debt
- Fund a wedding ceremony and/or reception
- Pay medical bills
- Pay off credit card debts
- Fund home renovations or construction
- Buy a new car—these loans are frequently handled by a car dealership’s lending agency
- Fund a holiday or extended trip
- Pay for funeral expenses
Variable vs. Fixed Interest Rates
Loan interest rates are either fixed or variable:
Fixed interest rates are, as their name suggests, a set percentage that does not change over the course of the loan’s repayment term. Fixed rates offer greater stability and predictability for regular repayments. On a fixed interest rate, your payments to the lender will not change between each scheduled instalment.
Variable interest rates fluctuate and change over time, based on an underlying benchmark interest rate, often referred to as a prime interest rate. While it might not seem like a good idea to get a variable rate, the appeal of this option is that, if the underlying rate declines, so too will your interest payments. The opposite is also true: if the prime rate rises, so will your interest payments.
Line of Credit Basics
A line of credit is a source of credit, or funding, extended to a borrower. Unlike a term loan that is paid down over the loan term, such as a 5-year loan to buy a car, you only have to apply once for a line of credit that you can continue to use and re-use, based on your credit needs. You are only charged interest on the amount you borrow.
A line of credit is, in many ways, similar to a credit card, as you are pre-approved for a maximum amount you can borrow. Once you make payments to reduce the balance owed, you can then borrow more on the line of credit, up to the pre-approved limit of the line of credit loan.
Definitions and Common Terms
Loan amount: The total dollar amount of your loan.
Interest rate: The annual interest rate, often called an annual percentage rate (APR) for this loan or line of credit.
Monthly payment: Monthly principal and interest payment (PI) for this loan or line of credit.
Term in months: Number of months for this loan or line of credit.
Payment options: Select the option that matches your payment type:
- Fixed loan term – Traditional amortization produces a fixed monthly payment. The monthly payment calculated will leave a zero balance at the end of the loan’s term.
- 2%, 1.5% or 1% of balance – Your minimum payment is calculated as a percentage of the outstanding principal balance. Your minimum payment will change each month, and if you only make the minimum payment your balance will not be zero at the end of your loan’s term.
- 100% interest owed – For lines of credit and loans that require you to pay interest owed, your payment is 100% of the interest accrued during the month but no principal. Your payment may not be fixed if your interest rate or principal balance changes.
We hope this summer and calculator are useful. If you have questions, please contact us. If you feel overwhelmed by debt and money matters, we can help you take back control. As a Licensed Insolvency Trustee, we can substantially reduce and eliminate debt with federal government-authorized bankruptcy and consumer proposal services.