1. What is Loan Cost?

The total loan cost represents the complete amount you'll pay back, including both the principal amount borrowed and the interest charged by the lender.

2. How Does the Calculator Work?

The calculator uses the simple loan cost equation:

Where:

• \( Principal \) — Original amount borrowed
• \( Interest \) — Total interest charged over loan term

Explanation: This calculation shows the true cost of borrowing money when you know both the principal and total interest amounts.

3. Importance of Loan Cost Calculation

Details: Understanding the total loan cost helps borrowers compare different loan options and make informed financial decisions.

4. Using the Calculator

Tips: Enter the principal amount and total interest in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Does this include all loan fees?
A: This basic calculation only includes principal and interest. Some loans may have additional fees that should be considered.

Q2: How is this different from APR?
A: APR (Annual Percentage Rate) includes fees and shows the yearly cost, while this shows the total dollar amount you'll pay.

Q3: Can I use this for any type of loan?
A: Yes, this basic calculation works for mortgages, personal loans, auto loans, etc., as long as you know the total interest.

Q4: Why calculate total loan cost?
A: It helps you understand the true cost of borrowing and compare different loan options effectively.

Q5: How can I reduce my total loan cost?
A: You can reduce total cost by getting lower interest rates, making extra payments, or choosing shorter loan terms.