Easy Guide on Refinancing Calculator (Lånekalkulator Refinansiering)

If you are new to the world of refinancing, it’s likely you aren’t conversant with the concept of the refinancing calculator. Knowing what this calculator is and how to use it will enable you to get the best refinance deals that are perfect for you in every way. Therefore, to ensure you are not at a disadvantage, this article will guide you on everything you need to know about refinancing calculators.

What is a Refinance Calculator?

A refinance calculator is a financial tool that allows you to estimate certain details of your refinancing plan. It usually reveals the total cost, interest rates, and monthly repayments. With this tool, you can make wise decisions regarding refinancing.

Most lenders have their own special refinance calculators that are preprogrammed with their charges, and interest rates. For these tools, you can only input how much loan you want to take and how long you want the repayment to last. Once you do this, the calculator will reveal the details of the credit based on the programmed rates.

Using the calculator of specific lenders will not allow you to compare the rates of other lenders. As such, using these tools is only beneficial if you’ve chosen to secure the refinance from that particular lender. For those yet to make that decision, it’s wise to use a third-party refinance calculator.

Using this calculation tool from a third party has many benefits. Chief among them is that you can compare the offers of different lenders. This is possible thanks to the freedom of details you can input into the calculator.

Why You Need a Refinance Calculator

Although these tools are termed “refinance calculators,” the fact is they can still be used for other loans. This is possible if you know how to use them. But if you are interested in just refinancing, here are some reasons why you need this calculation tool:

1. It Reveals the Cost of the Loan

With a refinance calculator you can find out what the overall cost of the loan will be; it usually reveals the interest as well as the installment payments. In some cases, establishment and administration (origination) fees are also added. You can read this piece by Business Insider to find out what an origination fee is. However, these fees depend on the bank or lender you select.

Do bear in mind that the calculator will not give you the real cost but a close estimate. Why is this so you might wonder? Well, when you apply for a refinance, the lender has to check your credit score as well as make other findings. As such, the overall cost and especially the interest are dependent on the borrower’s financial status and creditworthiness.

Using a refinance calculator to find out the cost of a loan is quite easy. First of all, you enter how much you need, and then the duration you need to pay it back. It’s advisable to determine how much you need before you begin the process of calculation.

To determine how much you’ll need to refinance, get the total of all your current debts that you’d like to pay off. Then create a monthly budget that includes your expenses and the amount you can afford to repay monthly. Once you’ve determined this, then you can input the amount you need into the calculator.

Note that choosing a longer time to repay the loan means lower monthly repayment. However, the overall cost of the loan will be higher. Therefore, you need to consider this carefully before taking the loan. The good thing is that you can choose to make an early repayment to clear the loan if you have the money available.

2. It Reveals the Competitiveness of your Lender

According to the Financial Agreement Acts, all lenders are mandated to clearly state the average interest rate that is attached to any loan. As a result, all lenders provide what is known as a loan example. This usually indicates the cost you’ll have to pay for loans you get from them. Yet, this example is not an accurate representation of what you’ll be offered as your credit score might influence the rate either positively or negatively.

If you use a lender’s refinancing calculator, because of the above explanation, the interest rate revealed is not exactly what you’ll get. This information is still useful in the sense that it gives you an idea of what to expect from that lender. You can then assess the competitiveness of the lender by comparing them with others.

To do this, find out your credit score online for free via various agencies. All you need to do is run a search on Google and you’ll be provided with options to choose from. Once you have your credit score, head to a third-party refinance calculator.

Input all the necessary details such as how much you need, your credit score, how long you need to repay, and the interest rate the lender gave you. Do this for different lenders to get an idea of their competitive prices. At the end of the day, you’ll discover which one is best for you.

Also read: Navigating The Loan Process With Bad Credit: A Step-By-Step Guide

3. It Lets You Know the Amount You Can Save When You Repay Faster

With the refinancing calculator, you can input an amount you want to borrow against different repayment durations. This exercise allows you to see how much the total loan will cost for these different durations. Generally, the longer the duration, the higher the overall cost. Therefore, the result you get for each duration can serve as a motivation to repay faster.

However, you shouldn’t choose a duration that will stress you out with the monthly repayment. If the monthly repayment is looking too much to manage, you can extend the duration. Many refinancing loans allow up to a maximum duration of 15 years for repayment. If you choose a longer duration, be reminded that the total cost of the loan will be way higher.

4. It Gives You an Idea of Your Potential Savings

One of the reasons individuals refinance loans is to save money by reducing the cost of their initial loan. With a refinancing calculator or as the Norwegians call it refinansieringskalkulator, you can find out your potential savings when you refinance all your unsecured debts. This includes installment plans, consumer loans, credit card indebtedness, etc.

Repaying your unsecured debts is crucial if you intend to grow financially. This type of debt can be financially overwhelming because of its high-interest rates. This problem is further compounded if you have to deal with multiple debts at a time. However, through refinancing, you can merge all these debts into a single loan and save money on interest.

So, how does a refinancing calculator give you an idea of your potential savings? Well, it’s quite simple. Calculate the total cost of all your unsecured debts as well as their interest rates.

Once you have the total cost of how much you need to repay these loans, it’s time to use the calculation tool. Input the amount of the total cost you calculated in the space for the amount of loan you need, how long you need to repay, and the interest rate if available. The result will display the total cost of refinancing these loans.

Now, compare your original total cost with the cost of refinancing the calculator produced. In most cases, you’ll realize that the latter is lesser than the former. The difference between both values is the potential amount you can save.

How to Get Cheap Refinance Loans

While it might have a temporary effect on your credit score, it’s still advisable to send a refinance loan application to several lenders at a time. This way, your credit score can be viewed almost at the same time by all the lenders before it takes a temporary downward plunge. Furthermore, following this strategy ensures that you receive the exact amount you’ll need to pay.

Before you send in your application, it’s expected that you’re already sure of how much you need, and how long you need to pay back. Therefore, to ensure you get the best deal, send the same details to all the lenders. If you don’t want to go through the hassle of applying yourself, you can hire a loan broker to do the job.

It’s expected that the lenders will use a more accurate refinance calculator to calculate your loan before sending you offers. Once the offers are sent to you, it’s time to compare them. Your focus should be on the total costs of the loan and the interest rates. You can then pick one that best suits you from the lot.

Also read: Key Factors to Consider Before Refinancing a Loan

Conclusion

Before you even apply for a refinancing loan, you can get an idea of what the total cost will be. The magic tool that makes this possible is known as a refinance calculator. In this article, we’ve revealed what this tool does and why you need to use one.