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Loan Total Formula:
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The Loan Total Calculator calculates the complete cost of a loan by adding the principal amount borrowed to the total interest that will be paid over the life of the loan. This helps borrowers understand the true cost of borrowing money.
The calculator uses a simple formula:
Where:
Explanation: This calculation shows the complete financial obligation of a loan, helping borrowers compare different loan options and understand the true cost of borrowing.
Details: Understanding the total cost of a loan is crucial for financial planning, budgeting, and making informed borrowing decisions. It helps borrowers avoid overextending themselves financially and compare different loan offers effectively.
Tips: Enter the principal amount in dollars, the total interest amount in dollars. Both values must be positive numbers. The calculator will display the total repayment amount.
Q1: What's the difference between principal and interest?
A: Principal is the original amount borrowed, while interest is the cost of borrowing that money, calculated as a percentage of the principal.
Q2: Does this calculator account for compound interest?
A: No, this is a simple calculator that adds principal and total interest. For compound interest calculations, you would need a more specialized calculator.
Q3: Why is knowing the total loan cost important?
A: It helps you understand the true cost of borrowing, compare different loan offers, and make informed financial decisions.
Q4: Are there other costs not included in this calculation?
A: Yes, this calculator only includes principal and interest. Additional costs like origination fees, insurance, or penalties may apply to some loans.
Q5: Can I use this for any type of loan?
A: Yes, this basic calculation applies to mortgages, car loans, personal loans, and other types of installment loans.