Loan calculators, like the one below, help you work out how much you can afford to borrow. We provide it because it is very important that you shouldn't ever take out a loan that you are unsure of being able to afford. So, calculating what your monthly payments would be dependant on the amount borrowed and period of repayment is a very helpful budgeting exercise.

Monthly loan payments calculator

Loan required:(?) £ numbers only ( eg 12500 ) Repayment period:  12 months, 1 year 18 months, 1.5 years 24 months, 2 years 30 months, 2.5 years 36 months, 3 years 42 months, 3.5 years 48 months, 4 years 54 months, 4.5 years 60 months, 5 years 6 years 7 years 8 years 9 years 10 years 11 years 12 years 13 years 14 years 15 years 16 years 17 years 18 years 19 years 20 years 21 years 22 years 23 years 24 years 25 years 26 years 27 years 28 years 29 years 30 years Annual interest rate:(?) % ( enter 7.5% as 7.5 )       Monthly repayment £ Repayment* loan  Total paid £   Interest paid £   A comparison, for convenience, at 5.5% Monthly repayment: £ Repayment* loan   Total paid: £   Interest paid: £

PLEASE NOTE: This calculator is for the purposes of general estimating only and does not take into account your particular loan or lender requirements when undertaking the calculation. This calculator provides only a possible figure based upon once a monthly recalculation.

* With a Repayment loan you will pay all interest due and repay all the capital owed (the loan amount) within the repayment period assuming no changes in the interest rate during the period.

Most loan calculators do one of two things. Either it will enable you to calculate the monthly repayment of a certain sized loan or it will allow you to find out how much you may be able to borrow.

In the first instance, some, like the loans calculator above, provide the flexibility of finding out what a monthly repayment might be based on the loan amount, the term and the annual interest rate. Some calculators, that you will normally find on a lender's website, will allow you only to enter the term and the amount, because the interest rate is already programmed in to their system and is tied to the individual product that you are considering.

If you need to know exactly how much a particular loan will cost you should find a calculator that includes that specific product. This loan calculator operates on the generic compound interest repayment formula and does not include items such as any application or set-up fees, etc.

The second main form of loan calculator is used by entering the amount you can afford to pay each month, and over how long a period and you will be told how much you can afford to borrow. These are usually specific to a given lender and type of loan.

These calculators are useless if you don't pay close attention to your ability to afford the repayment that results from these calculators. You should always satisfy yourself that you have sufficient disposable income to afford the ongoing monthly cost.

An effective way to do this is to take your net monthly income, subtract all of your normal expenses, not forgetting to include annual and quarterly costs apportioned on a monthly basis, and including clothing, entertainment etc. Then subtract from this figure a percentage (10% is a prudent amount you may wish to consider) to give you a safety buffer each month for unbudgeted emergencies. What's left is the absolute maximum monthly amount that you can afford to put against loan repayments.