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Tuesday, August 11, 2009

Loans and The Importance of Working Out What You Can Afford

Borrowing money, especially via loans, is one of the biggest decisions you can make - particularly during the economic crisis, when every expenditure or saving opportunity can make a big difference. That's why it's so important to research loan providers and carefully consider all your options before making any major financial decisions in respect of borrowing. However, before you start researching providers and options, you need to determine one vital piece of information first: the amount you can afford to borrow.

There are various ways to determine what you can afford when it comes to securing a loan. To begin, you can always meet with a credit specialist to help you determine an appropriate amount, or to research prospective monthly repayment plans. However, there are also ways for you to calculate these figures on your own, such as through a dedicated loan calculator.

Loan calculators can help you understand various aspects of borrowing. To start, they can help determine a suitable amount of borrowing that's right for you, based on factors such as income and assets. They can also help you calculate the interest payable on any borrowings over a defined period. And finally, they can give you an idea of your monthly repayments - the total sum to be repaid - inclusive of the loan and interest - and the total interest you will pay.

However, while different calculators tend to relay similar bits of information, some work a little differently than others. For instance, one loan calculator might simply require you to provide the duration of the loan in months, the amount you intend to borrow, and the annual percentage rate (APR). Others will ask for more information to calculate your eligibility to borrow. However, no matter what type of calculator you use, you're likely to come away with an idea of whether borrowing is right for you - and if so, the type of loan that may be. Loan calculators are also valid for both secured and unsecured loans, making them a very useful tool within the credit market.

But, while a loan calculator can be useful in helping you determine your eligibility, you'll ultimately want to contact companies directly before making any decisions to borrow. A lender can then talk you through their exact repayment plans, unique conditions and specific amounts before you enter into any agreement - ensuring you're well aware of all terms relevant to you before making any big financial moves.


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