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• Using a Loan Calculator: What You Need to Know

Using a Loan Calculator: What You Need to Know

When you’re looking for a home loan or personal loan in the Philippines, an extremely helpful and convenient tool to use is a loan calculator. Its estimates can help you make important decisions before you apply for a loan.

How loan calculators work

Loan calculators in the Philippines, which you can find on websites of loan providers, allow you to check how much you can borrow based on your monthly income or how much you’re going to pay off monthly based on your chosen loan amount and term.

Using a loan calculator is easy and quick—you just enter information such as the amount you want to borrow and your preferred repayment term, and the calculator automatically computes the amount you need to pay every month or the maximum amount you can borrow.

How to use a personal loan calculator

Want to know how much you must pay monthly for your loan? Simply go to the website of your bank of choice and look for its loan calculator. Computing your monthly repayments using a personal loan calculator is a straightforward process.

1. Enter your preferred loan amount. Be sure that it’s within the loan amount range offered by the bank.
2. Choose a payment term (the number of months you can pay off your personal loan).
3. Click Submit, Compute or Calculate to generate the monthly installment or amortization.

How to use a home loan calculator

Generally, housing loan providers in the Philippines offer an amortization or mortgage calculator, a maximum loanable amount calculator, or both.

Amortization/Mortgage Calculator

This calculator computes the estimated monthly amortization (principal and interest) and the required gross monthly income for you to qualify for a home loan based on your desired loan amount, repricing period, and repayment term.

Steps to use an amortization or mortgage calculator

1. Input your preferred loan amount. It should be equal or higher than the minimum home loan amount set by the lender.
2. Select a repricing period. You can choose from 1 to 30 years—the longer the period, the higher the interest rate is.
3. Select a payment term. It can be as short as 1 year to as long as 30 years.
4. Click Compute. The calculator will show you the principal and interest and the required gross monthly income.

To illustrate how a housing loan amortization works, let’s use the Pag-IBIG Fund amortization calculator.

Let’s say you want to borrow Php 1 million at a 1-year repricing period to be paid off for 30 years. After putting those details into the calculator, it shows that you’ll need to pay a monthly amortization of Php 5,677.89. Also, your gross monthly income should be at least Php 18,926.30 to qualify for the home loan with your desired loan amount, repricing period, and repayment term.

If you choose a shorter repayment term, both your monthly amortization and required gross monthly income will increase.

In the sample computation above, when the repayment term is shortened to only 1 year (with the same loan amount of Php 1 million and 1-year repricing period), the amortization and required gross income have increased to Php 85,836.78 and Php286,122.62, respectively.

Maximum loanable amount calculator

This home loan calculator lets you know the maximum amount you can borrow plus the estimated monthly amortization based on your monthly income. The higher your income, the higher amount you can loan.

Steps to use a maximum loanable amount calculator

1. Enter your gross monthly income. It should be equal or greater than the minimum monthly income required by the lender.
2. Choose your desired repayment period. It can be as short as 1 year to as long as 30 years.
3. Choose your desired pricing period.
4. The calculator will show you the estimated monthly amortization and home loan amount based on the information you provide.

Let’s use the Pag-IBIG housing loan calculator again as an example. If your monthly income is Php 25,000 and you want a 30-year loan term, you can borrow as much as Php 1.32 million with a monthly amortization of Php 7,500.

Someone who has double the monthly income (Php 50,000) can borrow as much as Php 2.64 million with a monthly amortization of Php 15,000.

Final Thoughts

Results from personal and home loan calculators should be taken as estimates only. Actual computations and the final loan amount will be provided by the lender when you apply for a loan.