How to Calculate your Borrowing Power
Looking out for a loan? Have you decided for how long you may need a loan? Wondering how much you can borrow? Borrowing a loan is a major decision and thus you are required to do a careful research and comparison ahead of applying for a loan. Money plays an integral part in everyone’s life. However, when you have lack of it, your financial condition may get badly disturbed and left you with no choice but to apply for a loan to handle some important and unavoidable financial requirements. There is variety of loan options available in the market and you can choose the right one that best suits your requirements and circumstances. Ahead of searching and finding the loan, the question that first comes to your mind is that how you can calculator your borrowing power or how much you can borrow.
Use borrowing power calculators
On loan comparison websites, you can easily find borrowing calculators to calculate how much money you can borrow on the basis of your needs, financial circumstances and your ability to repay the loan. In the calculator you simply need to put some details like-
- Personal details
- Loan details such as the loan amount and loan period
- Income details
- Employment information
- Expenses such as whether you need a loan for short term or long term based requirements
On using loan calculators, you will be able to estimate the total cost of the loan. It can even help you in setting a reasonable upper limit and a find a particular loan scheme that matches your requirements. The calculators will show up how much you will be paying back each month. Nobody understands your budget the way you do, so make sure you are comfortable with the amount you can thinking of borrowing and how much time you are getting to pay back that principle loan amount along with interest charged to the lender.
By using loan calculators, you can find out how much you could borrow in a personal loan, payday loan, short term loan, home loan or any other loan plan. In addition, such calculators can even in getting to know the loan amount at different rates, loan terms and income levels. Now this is called your borrowing power.
Financial institutions and lenders in different states work differently. Ahead of applying for a loan, you need to be qualifying on certain grounds first to become eligible for loans. You need to have proof of regular source of income, need to be over eighteen years of age and also need to have a valid active bank account in your name for direct fund transfer.
Know how to made your calculations
Input the following data in the calculator:
- Your monthly income
- Annual income
- Loan repayment tenure
- The amount you need
- Expenses list
- Total credit card limit if any
By putting up these details you will be able to calculate your principal and interest loan repayments. The graph shows the amount you can borrow and the total interest owed including interest rate, fee charges and APR. It will also show up the maximum loan amount you can borrow, based on your needs and repayment capability.
Know what requires to be considered as the potential borrower
- How you are living with current cash flow
- How much you need for your lined up expenditure
- How your credit rating is
- How much your credit worthiness is
Lenders will access your credit history to see if you can afford the loan you are applying for and whether or not you are likely to repay it. Having a bad credit history will reduce the chances of getting a loan at affordable rates and terms. Instead, many lenders will reject your loan applications straightaway. However, with advancement in technology and fabulous growth in the financial market will open several amazing loan options for the people with bad credit history too, but at higher interest charges. On the other hand, with a good credit score you will be welcomed by several lenders offering variety of loan options with affordable rates and terms.
Points of remember before applying for a loan
- It is important to not extend the repayment tenure of the loan as it will make your loan even more expensive with huge penalties and enhanced interest charges.
- Understanding your financial position is the first step in boosting your borrowing power. Maintaining your finances carefully, setting a timely repayments and building a strong credit history will take away the stress of applying for a loan.
- It is important to see how you do you actually need for your particular needs. Taking lesser or higher amount will create nuisance and affect your financial budget badly.
- Avoid applying for a loan if you are not sure about making timely repayment. Instead, look for other borrowing options with stable or no interest charges.