1. What is Total Loan Cost?

Total Loan Cost represents the complete amount you will pay back for a loan, including both the original borrowed amount (principal) and all interest charges accumulated over the loan term.

2. How Does the Calculator Work?

The calculator uses a simple formula:

Where:

• \( Principal \) — The original amount borrowed
• \( Interest \) — The total interest paid over the loan term

Explanation: This calculation helps borrowers understand the true cost of borrowing money, which is essential for financial planning and comparison between different loan options.

3. Importance of Calculating Total Loan Cost

Details: Understanding the total cost of a loan helps borrowers make informed financial decisions, compare different loan offers accurately, and plan their budget effectively to manage debt repayment.

4. Using the Calculator

Tips: Enter the principal amount (the original loan amount) and the total interest amount (the cost of borrowing). Both values must be positive numbers. The calculator will sum these values to show the total repayment amount.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between principal and interest?
A: Principal is the original amount borrowed, while interest is the additional cost charged by the lender for providing the loan.

Q2: Does this calculator work for all types of loans?
A: Yes, this basic calculation applies to mortgages, personal loans, auto loans, and other types of installment loans.

Q3: Why is knowing the total loan cost important?
A: It helps you understand the true cost of borrowing and compare different loan offers to find the most affordable option.

Q4: Are there other costs not included in this calculation?
A: Some loans may have additional fees (origination fees, late fees, etc.) that aren't included in the principal and interest amounts.

Q5: How can I reduce my total loan cost?
A: You can reduce total cost by securing a lower interest rate, making extra payments toward principal, or choosing a shorter loan term.