Like we said, a loan calculator can show you the total cost of your loan (the loan principle plus any interest you’ll owe). And that’s great for seeing how much a loan will cost your business in the long run (because boy, interest can add up quickly).
But a loan calculator can give you plenty of other useful information―information that can help you make smarter, more informed decisions before you take out a loan.
In fact, a loan calculator should show you the following:
- Total loan payback amount
- Estimated monthly payment
- Percentage of total repayment that goes to principle vs. interest
- Principle vs. interest amount for each payment (an amortization table)
So if, for example, you’re trying to decide between a loan with a longer repayment term and a lower interest rate (say, 10 year and 5%) and a loan with a shorter repayment term and a higher interest rate (like 7 years and 8%), the loan calculator can help you decide which to go with―whether you want the lower total payoff amount or the lower monthly payment.
Likewise, a loan calculator can see if your monthly loan payment will fit in your business budget, if it’s worth shopping around for a better interest rate, and so on.
Of course, you need to remember that a loan calculator is giving you estimates―so make sure you ask a lender for hard numbers before you commit to a loan.
Even so, a calculator’s estimates can give you plenty of information to help you choose the best loan for your business.