Advertisement
|
It can be difficult to compare loans because of differences in the
interest rates and fees. For example, which is the less expensive
loan:
- a loan with an 8% interest rate and 5% fees, or
- a loan with a 9% interest rate and 4% fees
This calculator calculates the equivalent no-fee interest rate for the
loan, allowing for easier comparison of loans with
different terms. The calculator makes appropriate adjustments to ensure
that the net disbursements are the same.
(The calculator effectively increases the loan balance enough so that
the net proceeds after deducting the fees is the same.)
Please note that this calculator does not involve net present value
adjustments. A loan with up-front fees is somewhat more expensive
than the equivalent loan with no fees, since the fees are paid earlier
in the lifetime of the loan.