Unless you’re a former mathlete, you might find calculating a loan a little daunting. There are so many equations to choose from! Is the interest simple or compounded? How can an exponent be negative? Which of the many formulas should you use? Why can’t your phone’s calculator handle equations, as well as graphing calculators in your sophomore Algebra class, did?

That’s where a loan calculator comes in. It streamlines the process, saving you a headache if numbers aren’t your strong suit. It also means you can try out various combinations in advance, giving you a better idea of what interest rates and payments you can afford before you start shopping. This is important because some banks will make an inquiry into your credit score, which can sometimes affect your credit score negatively. Helix does a hard inquiry through Clarity Credit Services, an alternative credit bureau, meaning your FICO credit score will only reflect this in the short term.

Interest, essentially, is what you pay in exchange for borrowing someone else’s money—in addition to repaying them for the initial loan. The thing is, even small percentages can really add up if you aren’t careful and prompt to make payments. If you’re a credit card user, you’re probably used to revolving debt, in which the credit is continuously renewed as the debt is paid. But in installment loans, sometimes called amortized loans, you’ll work on paying back both the loan and the interest in increments over a specific amount of time. Each installment goes toward both paying the interest and paying off the principal (the original amount that was borrowed).

In every installment loan, the lender you are borrowing from will establish an interest rate, which can greatly impact the total amount you’ll spend in the long run. Credit unions and smaller local banks often have lower interest on loans than giant national banks, but interest rates can vary widely depending on a series of factors, such as the “five C’s of Credit:” character, capacity, capital, conditions, and collateral. Each of these impacts the interest rate a lender is likely to give you based on how much of a risk you seem to be as a borrower.

• Character refers to your general perceived trustworthiness as a borrower. Just like applying for a job, your references and work history apply. Unlike applying for a job: your credit history is important, too.
• Capacity is essentially your cash flow. How likely are you to pay back the lender based on your income or how successfully you’ve paid off loans in the past? That’s where your credit score comes in. Borrowers with a higher credit score are more likely to be approved for loans
• Capital refers to how much you’ve already invested in your business if that’s what the loan is for. It shows your commitment—and if you’ve received some startup funding, it shows others believe in you, too.
• Conditions affect loan agreements as well. Is your business going extremely well? Then you look like a great candidate. Is your business constantly on the verge of bankruptcy? Less so.
• Collateral is something the lender can possess in a secured loan so they are sure you’ll pay them back—the deed to your house for the duration of a mortgage, for example.

Depending on the lender you choose, there may be additional fees built into your rate. Most loans will incorporate the interest rate, as well as any fees, into an Annual Percentage Rate (APR). As you shop around, it’s better to look at APR more than just the interest rates, so you can compare each loan more closely. You can learn more about APR in our “what is APR” article.

Most loan payments are made monthly, although they could also be bi-weekly, quarterly, etcetera. The frequency and total number of payments within the loan are important because they impact your APR—and therefore how much interest you’ll be paying in the long run.

How much do you really need to borrow? It’s a number you should think long and hard about. Many personal loans don’t allow you to adjust the loan amount later — instead, you’ll have to apply for a new, completely separate loan, going through the process all over again. But if you take out too much, you could be paying back a significantly larger amount, depending on your interest rate.

Now that you know what goes into calculating a loan, it’s time to look up a loan calculator! We recommend https://www.calculator.net/loan-calculator.html for an accurate loan payment calculator with a readily available amortization table, showing you what your payments will look like over time.