# How to calculate the cost of a personal loan?

# How to calculate the cost of a personal loan?

Before borrowing money to carry out your projects, you must estimate what this credit will actually cost you. This is also what will determine your borrowing capacity.

## What is the total cost of a loan?

When you decide to take a loan from a bank, or from a credit organization, it will have a cost for you. There are several parameters to consider when **calculating the total cost of a loan** :

- The amount borrowed;

- The duration of the contract ;

- The interest rate applied;

- The frequency of repayments (generally monthly).

### How to calculate the cost of a loan without insurance: the formula

To determine the amount of your monthly payments , you can use a formula that will allow you to **calculate the cost of your loan** . To calculate m (the monthly payment ), as a function of t (the rate), for n (a duration in years) and C (the borrowed capital): m = (C × (t / 12)) / 1 - (1 + (t / 12)) √ (12 × n)

### What is interest?

When a bank or a credit institution lends money to its customers, it offers them a service. It is therefore a service for which she will be paid via interest. Indeed, the bank buys funds at a certain amount and reimburses its expenses thanks to the interest, which therefore enters into the **calculation of the cost of a loan** .

The interest rate determines the amount. Its calculation depends on several factors:

- The duration of the repayment;

- The profile of the borrower (individuals, professional, etc.);

- Market rules;

- The type of credit.

### The amortization table

When discussing the loan offer, a repayment schedule is attached. This is the amortization table. It allows you to get an idea of how much to repay each month without going into big calculations. It shows you the split between principal, interest and insurance in what you pay each month.

## The personal loan simulation to calculate a credit

### Calculation of your monthly payments

To simulate the cost of your credit, go to the Finance Studio personal loan simulation page. Enter the amount borrowed, the duration of the loan and the repayment period in the spaces provided. The simulator will take care of the calculation and you will know the total cost of your credit and your monthly payments .

### Encrypted example

If you borrow € 200,000, at a rate of 5.5%, over 15 years: your monthly payments will be € 1,634.17 and the total cost of the credit will be € 94,150 excluding insurance. If you borrow € 200,000, at a rate of 5.7%, over 20 years: your monthly payments will be € 1,298.47 and the total cost of the credit € 135,632 excluding insurance.

## Determine your borrowing capacity

The borrowing capacity is the amount that a borrower can obtain during a loan. It will depend on:

- The debt ratio ;

- The amount of the contribution;

- The type of loan (fixed or variable rate);

- The duration of the loan;

- The amount of monthly payments .

### Formula for calculating borrowing capacity

The borrowing capacity corresponds to a simple calculation: income - fixed charges. It is in the expenses part that the repayment of a loan will be taken into account. We define the borrowing capacity to ensure that the remainder to live will be sufficient for the household, that it will have enough money for the current expenses and the repayment of the credit.

## Finance Studio consumer credit

If you need cash to carry out your projects, Finance Studio consumer credit is perfectly suited. You will find loans adapted to each of your needs, ranging from car loans , to work loans , to energy renovation loans . To claim a consumer credit, you must be of legal age, not be registered with the Banque de France and be a resident of French territory.