Kash Avena
Applying for a loan without knowing how it impacts your finances can be as dangerous as driving blindly in pitch dark. Know the advantages of using a loan calculator in making informed financial decisions, before you crash your bank account.
With over 1,500 registered lending companies in the Philippines as of 2014 according to the Securities and Exchange Commission, it is easier than ever to simply fill out a form and apply for a loan these days. With the advent of technology, you can even do this online. Be it a salary loan, car loan, OFW loan, business loan, or any type of loan that you need, chances are there is an online loan application that makes the whole process even faster and more convenient compared to lining up in a bank or lending office.
While there is nothing wrong with this, it cannot be overstated that you need to understand how a loan can impact you financially on a monthly basis. Before you even fill out that loan application, you should know how much money you set aside to repay your loan. After all, we figure even the most mundane purchases into our budgets. How much more for a loan that can affect your credit history with financial institutions?
Luckily, aside from facilitating faster loan transactions, technology can also help you make sound and informed financing decisions. Loan calculators for instance can help you project how much montly payments you need to make based on the amount you borrow among other factors. There are sites that list the best loan calculators in the internet. There are also loan calculators that are specifically for borrowers from the Philippines. Just a little bit of research can give you that advantage in getting the best loan possible for you.
What exactly are the benefits of using a loan calculator when applying for a loan? We list the top 5 below:
Loan Calculators Let You Figure Out How Much Money You Can Actually Borrow
Using a loan calculator allows you to reconsider the loan amount you want to apply for. This is because it shows you how much you need to shell out monthly to pay for your loan. Depending on your monthly payment amount versus your income and other recurring expenses, you can see whether or not you can increase or should decrease the amount of cash you want to borrow.
They Allow You to Prepare You For Your Monthly Payment
Computing for your loan also allows you to plan for your loan repayment. Even if you are only in the initial stages of your loan application, you can already adjust your monthly expenditure to accommodate your payment. This way, you ease comfortably into the loan and increase the odds of paying back according to schedule.
Loan Calculators Increase Your Chances of Loan Approval
According to an article in Investopedia, debt-to-income ratio is “…one way lenders…measure an individual’s ability to manage monthly payment and repay debts.” In short, the lower your loan amount compared to your income is, the higher the chance of a lender approving your application. Although there is no hard and fast rule as banks and lending companies have their own individual criteria, in general your total monthly loan repayment (including other loans such as credit card debt or mortgage) should not be more than 35% to 40% of your monthly income. Loan calculators allow you compute for your ideal loan amount.
They Empower You to Take Care of Your Credit History
Getting the right loan amount – one that you can afford – can have a domino effect leading all the way to your future financial transactions. For example, if you get a loan that you are capable of paying for on a monthly basis will help you complete your loan term without defaulting. This, in turn, allows you to build a good credit history. When you want to apply for a loan in the future, lenders will use your credit history as one possible basis for granting or denying your application.
Loan Calculators Help You Learn to Avoid Loan Sharks
Lastly, loan calculators help you avoid losing loan deals, such as those offered by loan sharks. By knowing projected monthly interest rates from reputable banks and lending companies, you will be less tempted to get a loan from informal lenders. After all, why would you chose to have a monthly interest rate of 20% if you can have it at 2%? Not sure what the difference is? Check this infographic to see how devastating loan sharks can be.
Ready to Make an Informed Loan Application?
Loansolutions is the largest network of legitimate lending companies in the Philippines. Our team of Loansolutions Concierges will help you with the whole loan process, from application to documents submission to approval. We hate loan sharks and love helping people.
