If you are going to borrow responsibly it is essentially that you figure out whether or not you will be able to repay a loan in the stated period of time before you take it out. In order to make this decision you will need to calculate the “total repayment amount” or, in other words, the full amount that you will repay to your creditor after interest. The easiest way to do this is to use one of the many loan calculators found around the internet. These will ask you for some basic information about your loan before figuring out the full amount that you will pay when all is said and done.
The information that a loan calculator will always require boils down to three numbers: the “principle” or amount that you wish to borrow, the interest rate you have been asked to pay, and the length of time that you are going to borrow it for. The principle is the first and often the largest number. With one of our pay day loans it will always be a sum of money between £100 and £1000. You can expect the total repayment amount, however, to be higher than this.
The next piece of information that will be request will be the interest rate, quoted in terms of APR. Many loan companies, however, will provide calculators that are tailored to their own loans and which therefore include their own APR as standard. APR stands for annual percentage rate and is the interest that you will pay on your loan, only quoted as though you were taking the loan out for a year. In the UK it is standard practice to quote interest in terms of APR even if you are only taking your loan out for a month. By dividing the APR by 12 you get a better reflection of how much your loan will cost you if you take the loan out for a month.
Finally, you will need to specify the length of time that you are borrowing the money for. With a pay day loan this will always be a period of between 1 and 30 days. Obviously, the longer you borrow the money for the more that you will end up paying or, in other words, the higher your total repayment amount will be. Crucially, the loan calculator does not take into account the possibility that you may take longer to repay your loan than you initially agreed and if this happens then your total repayment amount will be much higher due to late or missed payment charges.
Once you’ve input all of this information into the calculator it will quickly work out the total amount that you can expect to repay on this loan during that time period. If you are paying back in installments it may also calculate for you the cost of each installment which is also useful information for being able to plan you ahead financially. With this information in hand you should be able to make a sensible decision about whether or not to take out the loan.