Loans can be a critical lifeline in times of unexpected crisis, or a tool making upward mobility possible — so long as lenders understand the costs.

“Personal loans can help you cover almost any purchase or consolidate higher-interest debt,” says Leslie Tayne, the founder and head attorney at Tayne Law Group, which specializes in consumer debt. Common uses include paying for home improvements, medical bills, or unexpected expenses.

“The borrower gets one lump sum and then pays it back through a series of fixed monthly payments for a fixed repayment period, making it easy to budget for and know exactly when the loan will be paid off,” explains Matt Lattman, vice president of personal loans at Discover Loans.

However, even if you get a fixed repayment period and amount, you might not know exactly how the lender calculates your monthly payment. And it matters: Understanding how to calculate loan payments gives you an insight into the total cost of the loan, plus how you could potentially save money.

Original article: https://time.com/nextadvisor/loans/personal-loans/how-to-calculate-loan-payments-and-costs/

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