1. What is Loan Carrying Cost?

The loan carrying cost represents the total monthly expenses associated with maintaining a loan, including interest payments, fees, and any additional carrying costs. It helps borrowers understand the true cost of maintaining credit.

2. How Does the Calculator Work?

The calculator uses the loan carrying cost formula:

Where:

• \( Interest \) — Annual interest amount in dollars
• \( Fees \) — Monthly fees associated with the loan
• \( Carrying Cost \) — Additional monthly costs to maintain the loan

Explanation: The equation converts annual interest to monthly by dividing by 12, then adds any monthly fees and carrying costs to determine the total monthly expense.

3. Importance of Loan Carrying Cost Calculation

Details: Calculating the true monthly carrying cost helps borrowers budget accurately, compare loan options, and understand the full financial impact of maintaining debt.

4. Using the Calculator

Tips: Enter the annual interest amount in dollars, any monthly fees, and additional carrying costs. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's included in carrying costs?
A: Carrying costs may include insurance, taxes, maintenance fees, or any other recurring expenses tied to maintaining the loan.

Q2: How is this different from APR?
A: APR includes interest and certain fees, while carrying cost includes all monthly expenses associated with maintaining the loan.

Q3: Should I include principal payments?
A: No, this calculator focuses on the cost of carrying the loan, not principal repayment which builds equity.

Q4: How often should I recalculate?
A: Recalculate whenever interest rates change, fees are adjusted, or carrying costs are modified.

Q5: Can this be used for business loans?
A: Yes, the same calculation applies to both personal and business loans.