Interest rates affect all types of borrowing from your home loan to your car loan to your credit card so it's important to keep on top of them and to know how they affect your personal finances. Using a good interest rate calculator for particular calculations can be a great help and here we show you how.
Interest rates are set monthly by the Reserve Bank of Australia. They set the ‘cash' interest rate which credit providers will use to set their own rates. On any loan there can be a variety of interest rate types – fixed rates that don't change, variable rates that will go up or down based upon the cash rate or partially fixed rates that will be fixed for a certain period during a longer loan, like a home loan.
An interest rate calculator may be incorporated into a home loan calculator, for example, to let you compare home loans of different interest rates to see how that affects your repayments and total interest paid on the principal; feeding slightly different rates in may affect the loan considerably so it's worth checking to get a guideline, though remember that they do not take fees and charges into account – only the principal amount, the interest rate and the loan period.
Another type of interest rate calculator may be used to calculate the interest you will pay on car loan repayments, where you enter the number of monthly repayments, the interest rate and the principal and it will instantly calculate the monthly payment you will have to make and the total interest you will pay.
One of the most common forms of interest rate calculators is the credit card interest calculator. This allows you to see how varying APR's (Annual Purchase Rates) will affect your credit card purchases and overall credit card debt. You may be surprised to see how much interest you pay on your purchases and this can help change your buying habits to be more responsible; using calculators for your credit card is a good way of helping to keep your finances under control as we all know what a debt trap they can be.
A credit card reduction calculator allows you to see what you will need to do to pay off your credit card debt completely – something that we should all be striving to do. With this calculator you enter the debt amount and your standard monthly payment, the interest rate and the ideal period in which you would like the debt paid off and it will tell you what your new monthly payment will need to be and the total amount of interest you will save by doing so.
When using a credit card interest calculator or any financial calculator bear in mind that their calculations are estimates only and do not take into account factors like fees and charges, your own personal credit worthiness etc.
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