There are any number of reasons why a person would want to get a personal loan, from paying off your debts to paying towards your wedding, and even helping you renovate your dream home. A personal loan can be an extremely useful financial resource!

However, much like with anything important in life, you’ll need to do a bit of research before you sign on the dotted line. Especially when that ‘anything’ is financial in nature. One of the ways you can research a personal loan is to find out more about what this kind of loan is and to use a personal loan calculator to find out what your repayments could be.

In both regards, we’ve got you covered – starting with a brief explanation of what a personal loan is, how a personal loan calculator works, and even a few tips on how to use this kind of tool to your best advantage.

What a personal loan is

Generally speaking, a personal loan is money that you borrow from a lender, usually a bank, which you then pay back on a monthly basis. Your repayment will include interest charged by the bank and the loan period lasts anything from two months to five years.

The actual interest rate and the exact repayment period options depends on the lender you go with.

An interesting thing to note about personal loans (well, we think it’s interesting) is that they tend to be unsecured. What we mean by this, is that you don’t need to use any of your assets as collateral in order to get the loan.

Why you should use a personal loan calculator

Part of your homework about getting a personal loan should include experimenting with a personal loan affordability calculator. By using this type of calculator, you can work out what the monthly repayment costs of the personal loan you want would come to. You can also check to see which pay-back period is better and which terms are more suitable to your circumstances.

Basically, you’ll get an overall idea of whether you can afford to borrow the money or not.

How to use a personal loan calculator

Choosing between the different personal loans out there might not be the easiest choice to make, but thankfully it’s quite simple to use a personal loan repayment calculator.

You could just go ahead and use the calculator to check it out, but by way of providing a neat little explanation, we can tell you that this online tool features a slider that you can adjust until you reach the amount of money you want to borrow and then you adjust the second sliding tool to choose the repayment term. Alternatively, you’ll just need to type in the amount and repayment terms.

Once you’ve made your selection, the calculator will provide you with the repayment details of a loan the size and length of repayment time that you have in mind.

It’s really as easy as that, and armed with information like this, you can make a more informed decision about which personal loan is for you.

A few tips to make the most of this tool

If this is your first time getting a personal loan, it’s handy to have as much useful information at your fingertips as possible. To that end, we have a few tips that will help you maximise the benefits of playing around with a personal loan calculator.

Firstly, you should choose an amount that you can afford to pay back. Not just for the obvious reasons of being in a position to pay your loan back, but also so that you don’t damage your credit score. Applying for loans that are too high are considered red flags by credit bureaus.

Our second tip is for you to check for any other additional monthly service fee or fees associated with the loan you want. This way, you can calculate the total cost of your loan and not just the amount you want to borrow.

Lastly, we urge you to choose a repayment term that’s realistic. It might seem ideal to go for a shorter loan term so that it’s over and done with much quicker and reduces the total interest you’ll pay, but this will mean a higher monthly payment amount. A longer repayment period, on the other hand, does give you the benefit of a lower monthly installment, but you will incur a higher total interest.

Use the best personal loan calculator in South Africa

If you’re on the hunt for a personal loan that won’t give you “buyer’s remorse” then using a personal loan calculator to help you choose the right type of loan is a step in the right direction.

In short, using the calculator will help you to make an informed decision, which is what AA Inform is all about. That’s why we offer you access to all sorts of useful tools and resources, including calculators, property valuation reports, multiple car and home insurance quotes, and much more.