37.37% APRC Representative Variable

Typical Example: Loan Amount: £11,695.00, Loan Term: 180 Months, Interest Rate: 30.60% PA (variable), Monthly Repayments: £316.27, Total Amount Repayable: £56,927.70 . This example includes an Arrangement fee of £1169.50 (10% of the loan amount) and a Servicing fee of £935.60 (8% of the loan amount). Read about our Rates and Fees.

THINK CAREFULLY BEFORE SECURING DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER LOAN SECURED AGAINST IT.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING, YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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How do loan calculators actually work?

Home > How to > How do loan calculators actually work?

If you’ve ever applied for any type of loan online, particularly a secured homeowner loan, chances are that you will have come across a loan calculator at one time or another – usually as a vital first step in the loan application process.

Secured loan calculators are generally designed to inform the applicant roughly how much their loan is going to cost over a specific period of time so that they can see an estimated cost of their monthly repayments and rate of interest.

It always pays, in the long run, to get an overview of the terms of a loan before submitting a formal application. By calculating secured loan repayments first, the applicant will be in a far better position to decide whether this is the best credit option available to them. If so, they can then start to plan their budget and get a better feel for exactly how much money they can afford to borrow over a certain time period.

All that said, one question is often left unanswered: how do loan calculators actually work? Let’s take you through the range of factors that play into getting your estimate.

Know your limits

One of the most important details of any homeowner loan calculator is the ability to clearly see both the minimum and maximum amounts that are available to borrow from a particular lender.

Loan rates tend to be tiered so that, as a rule of thumb, the more you are looking to borrow, the lower the overall rate of interest you will be charged as part of your repayment plan. So, you may pay a lower rate of interest to borrow £5,000 than you would £2,000. It’s largely the same case with repayment periods, whereby the shorter the repayment period, the lower total amount of interest that is due to be repaid. Most secured loan calculators will offer a loan duration from anywhere between 12 months and 15 years.

In most cases, a secured loan option will involve a far higher maximum limit because the loan is ‘secured’ against a person’s property or another valuable asset as a form of collateral should they fail to fulfil their agreed repayment schedule as agreed.

Understanding estimations

It’s important to recognise that loan calculators can only provide you with a rough estimation of the terms of your loan that is based on the average person’s financial situation.

When it comes to submitting an application, most lenders will also take into account individual factors such as credit history and financial reliability on a case-by-case basis. This may affect the terms of the loan calculation that the applicant initially completed.

Why credit history matters

More often than not, when you apply for a secured loan you will be subject to a personal credit score check which aims to clarify how you have managed debts previously.  The good news is that Evolution Money will only initially conduct a quotation credit search which leaves a soft footprint on your credit file rather than a hard footprint that would be left by a full credit search. A soft footprint does not affect your credit score and Evolution will only conduct a hard footprint credit search if you proceed with a loan.

If you have regularly missed payments in the past, a low credit score may result in a higher rate of interest, or it may even be deemed too low for approval and your loan application could be turned down. There are a number of independent credit score estimation providers available online, which allow applicants to ascertain how likely it is that they are eligible for a loan.  However, Evolution Money do not rely on credit scores alone, we take the time to understand your personal circumstances.

Warning: Late payment can cause you serious money problems. For help, go to moneyadviceservice.org.uk

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Evolution Money Limited is a licensed credit broker and service provider to Evolution Lending Limited. If your application doesn’t meet the underwriting requirements of Evolution Lending Limited we may pass your information to other lenders and brokers. Evolution Money Limited is a company registered in England & Wales, registration number 06987852 and registered at 8 St John Street, Manchester, M3 4DU. Authorised and regulated by the Financial Conduct Authority, firm reference number 708324.

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