Credit calculator

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  • November 10, 2019
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Wondering how to choose the best credit offer? A credit calculator will help you. It is a very simple tool that allows you to estimate the cost of credit and the number and amount of monthly installments. The first credit calculators were created a long time ago, and the most popular were in the years 2005-2007 during the economic boom. At that time, Poles used mortgage loan calculators most frequently, which was a result of the revival in the real estate market. Thanks to the calculator, it is possible to calculate the parameters of each type of loan. This is a very important help in taking the final decision on taking a loan. Although the results should be treated as estimates, they are nevertheless much closer to the final offer of the bank. Taking out a loan is a very serious financial liability, which will rest on our shoulders sometimes for many years. Therefore, it is worth making every effort not to regret our decision.
Credit calculator
How to use a credit calculator? First of all, in order to be able to make calculations, you need to enter appropriate data. First of all, we need to determine the amount we want to borrow. This is the basic parameter of each credit. Then you should enter the nominal interest rate, which the bank gives on an annual basis, into the calculator. We also need to specify the period of credit we are interested in. In order for the calculations to be reliable, it is also necessary to determine the form of installments – whether it is to be decreasing or fixed. It is worth remembering that a good calculator is able to calculate the installments and costs of each type of credit.
Of course, you should also bear in mind that the credit calculator will only present us with “dry” results, without any comment. How we interpret these results depends largely on our economic knowledge. Although this is rather basic knowledge of finance, we should be able to correctly read the results from the calculator. Sometimes these results can be distorted by incorrectly entered data. This happens, for example, in the case of a mortgage loan calculator, when we lower the costs of building a house or buying a flat.
How to choose the best calculator
Which calculator is the best to use? It should be noted that there are many websites with credit calculators on the Internet. However, not all of them are fully professional. It is worth checking if the calculator has a clearly defined instruction manual. There should also be visible information that the calculator’s data are estimates and are for reference purposes only. In order to choose the best calculator it is also worth to use the opinions on the Internet, which you will find on numerous forums and discussion groups on Facebook. You can also always use the tips of trusted friends. Credit is a very serious commitment, so it’s worth recalculating everything well before you take it out.
Loan interest rate
One of the amounts to be entered in the credit calculator is the nominal interest rate, which, according to the Act, may not be higher than four times the pawn rate set by the office. Banks indicate the annual interest rate. In credit practice, there are two types of interest rates: fixed and variable.
Fixed interest rates are specific to short-term loans. Fixed interest rates apply throughout the life of the loan agreement. The repayment schedule is also unchanged. The situation is different in the case of variable interest rates. In this case, there is a fixed part of the interest rate (margin) and a variable part, the size of which is shaped by reference to an indicator. Most often it is WIBOR, i.e. the interest rate binding on the interbank market. Therefore, variable interest rates may be very beneficial for borrowers when the Monetary Policy Council reduces interest rates. Then the interest rate on the loan decreases.
Credit instalments
The credit calculator should also specify the type of installments we are interested in: equal or decreasing. Equal installments maintain a fixed amount throughout the entire loan term. The installments include our debt and interest. In the initial phase of financing, we pay more interest and less capital. Over time, these proportions are reversed.
In the case of decreasing installments, the situation is slightly different. The amount of the instalment decreases over the course of the financing period. This is because interest is charged on outstanding capital, which is getting smaller and smaller over time. Degressive instalments are therefore a much more advantageous solution for the borrower. It is also worth noting that the amount of instalments is affected by the duration of the loan. The longer it is, the smaller the monthly installments may be. In the case of short-term loans, instalments may be very high.

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