Loan calculator Canada – A comprehensive guide
What is a loan calculator?
From its name, a loan calculator seems like it’s just a tool that tells you how much you’re allowed to borrow from lenders and financial institutions. While that’s part of its function, loan calculators also can estimate the interest rate, the length of the term, and your monthly payments. To get the final estimation, the calculator will need information such as your credit score and income.
Using a loan calculator may not be an obligatory step in your loan journey, but it is highly recommended that one be used before applying for loans. Seeing how much you would have to pay towards the loan on a regular basis helps you decide if the loan is an effective decision for your finances.
What are the factors in Canadian loan calculation?
When you’re calculating your loan, you’ll have to keep four main factors in mind.
The amount you’re asking for matters in the rest of the calculation. For example, if the loan is about $2500, the lender will expect you to repay it back in a shorter amount of time than a loan of $50,000. Before applying for a loan, it is best to know how much you need exactly. If you’re too short, you may need to apply for a loan again; if it’s too big, you may be paying more interest.
The interest rate may be different for everyone as other factors have the most effect on it. The market interest, a borrower’s credit score, the principal amount, and the lender’s offers can all determine an individual’s interest rate.
Once you’ve been approved for a loan, you’ll be able to choose how frequently you’d like to pay. The size of each payment will be different, depending on what frequency you choose. The most common is bi-weekly. Regardless of how frequent you choose, confirm with yourself that your financial situation will be able to maintain the rhythm.
Depending on your agreement with your lender, you’re allowed to put a down payment or make extra payments during the term. Some loans give borrowers the chance to prepay, like auto loans. On the other hand, some contracts will state that there are penalties with extra payments, while other lenders will allow you to do so freely. Student loans are an example of one that allows you to make extra payments.
Loans that have the option for borrowers to repay extra during the term are open loans, and loans that have more structured payments are closed loans. They are frequently within the context of mortgages. Home equity loans, being second mortgages, also follow this pattern and are typically closed mortgages.
What types of loans are in Canada?
Borrowers can choose from a variety of different loans, from flexible personal loans to large business loans to launch a company.
This is what people will think of when a loan is mentioned around them. Lenders provide a borrower a lump sum with an interest rate; they expect the borrower to fully repay it by a certain date. Most people are able to get a loan from a lender as long as they are of age and have good financial standing, such as a high credit score and steady income. The personal loan is flexible, letting borrowers use it towards debt consolidation, boat purchases, or vacation funds.
To buy a house in Canada requires a significant amount of money, so lenders and banks provide borrowing opportunities to homebuyers. In the context of loan calculators, it may need your debt-to-income ratio and your down payment to provide a more accurate mortgage loans estimation.
It’s not unusual for Canadians to have multiple outstanding debts, so a common solution is to gather all of that into one monthly payment. A debt consolidation loan is designed to be enough to cover most if not all of one’s outstanding debt, leaving the borrower with just one or two more manageable payments.
Much like buying a house, banks provide vehicle buyers with a large sum of money to buy the car, and you’re expected to repay the loan in full in a few years. Remember that auto loan calculators do not factor in the price of insurance and taxes, so be mindful of adding that into your financial planning.
In Canada, student loans are given by the provincial government or from private lenders. Student loans are common in Canada, and the amount of money you receive depends on a few factors such as where you live and household income. They also have lower interest rates as the government is aware that students do not have as much time to work during their academic career.
Banks and alternative lenders provide loans that are specific to your business or company, such as buying equipment or launching the business itself. Business loans can be big, but the interest rate can be subject to fluctuating. Additionally, the bigger the loan you ask for, the higher the expectations.
The most flexible and comprehensive loan is a home equity loan, which is offered by Alpine Credits. While it’s restricted to people who have owned property for at least a couple years, home equity loans provide a significant advantage because they are secured, low interest, and big. Home equity loans are flexible and can be used for any of the above, like getting another house, launching a business, or consolidating debt.
Canadian loan calculator features
While every loan calculator will help you determine costs, each one has unique factors that are exclusive to that type of loan. Each feature is required by the calculator and will help you determine how much you’ll be paying in total.
|Type of calculator||Features|
|Basic loan calculator||— Loan amount
— Interest rate
— Loan term
|Advanced loan calculator||— Compounding
— Number of payments
|Mortgage payment calculator||— Mortgage principal
— Interest rate
|Mortgage affordability calculator||— Income (before taxes)
— Down payment amount
|Mortgage refinance calculator||— Property value
— Outstanding mortgage amount
— Term length
— Type of rate
|Business loan calculator||— Compound
— Interest rate
|Debt consolidation calculator||— Existing debt streams
— Remaining balance on debt
— Minimum payments
— Loan amount
Top Canadian loan calculator tools
Practically every calculator will be able to give accurate results. A few kinds of calculators that you may prefer include the following:
- Bank and credit union calculators — each financial institution in Canada has their own loan calculators.
- Government-sponsored calculators — the official site of government of Canada provides many financial resources, including loan calculators.
- Independent online calculators — a simple online search can help you find many calculators online. Some sites will provide all the loan calculators in one page, while others are designed to calculate a specific type of loan.
- Mobile applications — sometimes using a calculator on handheld devices is simpler. A few applications are available for download onto your phone.
How do you use a loan calculator?
Avoid common mistakes and misconceptions
Getting a loan can appear to be a simple process, but many Canadians should be reminded that loans are not free money. By remembering the following tips, borrowers can avoid some financial mistakes.
- Know your own affordability — even before you start calculating, understand where you are financially. Budgeting calculators are also available online.
- Understand the impact of interest rate changes — the interest rate on your loan will only change if you choose a variable rate. Even so, knowing what this could mean for your loan can help you make a decision.
- Account for additional costs and fees — no matter the lender, fees are a usual part of the loan process.
Tips for choosing the right loan in Canada
Alternative lenders, like Alpine Credits, and traditional institutions have different programs and offers for every kind of financial situation. Before choosing one, it’s important to explore possible options.
The interest tends to be underestimated. Always ensure that not only will you be able to repay the loan in time, but that you’ll also be able to meet the lender’s terms and conditions regarding interest rates and fees.
Credit counselling, financial advisors, and resources on the internet are all great ways to determine what the best path for you is.
Frequently asked questions
While there are many calculators online, there may be some who prefer to do the calculation manually. The simple form of loan that is paid monthly is: monthly payment = principal x (interest rate/12).
The main advantage of a mortgage calculator is that shows you a mortgage payment schedule. It can show you much you’ll pay at a frequency of your choice in addition to how much you can save by making prepayments.
Conclusion: the benefit of using loan calculators
All in all, using a calculator is a very beneficial step in your loan application process. Understanding what role a loan could play in your finances can be very helpful for your budgeting. All your calculations can also be done with Alpine Credits. While we specialize in home equity loans, are calculators can summarize all the information you need to know regarding other loans.
Home equity loans will also be able to cover every kind of expense you’d need a loan for, which simplifies the calculation process. Instead of having to compare different offers and different kinds of loans, you can focus on a home equity loan.
You can receive a home equity loan from Alpine Credits by contacting someone on the team of Financial Solutions Specialists. They will be able to answer your questions about home equity loans and help you navigate your options. If you have paid at least 25% of your mortgage, you will be approved for a loan.