loan paymentsMost people think that there are only two numbers they have to worry about with a loan: the size of the loan payments, and how many they will have to make.

There are actually more factors at play then these two… but they do remain the most important. The amount of interest you will be paying is vital.

Before agreeing to a loan – any kind of loan – you need to calculate the overall cost of it.

The Basics

How much are you going to borrow? How long do you want the loan to last? Finally, what is the APR or interest rate for the borrowed sum?

These numbers will give you the total repayment amount, which you will need to compare to the repayment schedule and make sure the monthly loan payments are accurate.

This is your baseline, your starting point, and will give you a very clear view of the loan and it’s cost.

But you’re not done yet! Next you have to try and account for all the other things you will have to pay for.

The Extras

Every different lender is allowed to establish their own rules for repayment… as well as their own fees and surcharges.

There may be an origination fee, or some other kind of fee they charge for starting the loan.

Many lenders will charge late fees for delinquent loan payments.

Also, some lenders have strict repayment guidelines established and they will charge you for any violation of these rules. This may even include charging you extra for paying off your loan early.

Miscellaneous fees and extra charges cannot be added in later, but they can be worked into the language of the loan contract. Be very sure you know what you are agreeing to before signing, and don’t be afraid to ask for a total cost for the life of the loan, with all extras included.

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