Enter the loan amount in your selected currency.
Enter the loan term in months.
Enter the interest rate as a percentage.
Enter any additional fees in your selected currency.
History:

Explanation

How to calculate the cost per microloan?

The cost per microloan can be calculated using the following formula:

Total Repayment Amount:

§§ \text{Total Repayment} = \text{Loan Amount} + \left( \text{Loan Amount} \times \frac{\text{Interest Rate}}{100} \right) + \text{Fees} §§

where:

  • § \text{Total Repayment} § — the total amount to be repaid over the loan term
  • § \text{Loan Amount} § — the initial amount borrowed
  • § \text{Interest Rate} § — the annual interest rate (as a percentage)
  • § \text{Fees} § — any additional fees associated with the loan

Cost per Microloan:

§§ \text{Cost per Microloan} = \frac{\text{Total Repayment}}{\text{Loan Term}} §§

where:

  • § \text{Cost per Microloan} § — the amount to be paid per month
  • § \text{Loan Term} § — the duration of the loan in months

Example:

  1. Input Values:

    • Loan Amount (§ \text{Loan Amount} §): $1000
    • Loan Term (§ \text{Loan Term} §): 12 months
    • Interest Rate (§ \text{Interest Rate} §): 5%
    • Fees (§ \text{Fees} §): $50

  2. Calculations:

    • Total Repayment:
      • §§ \text{Total Repayment} = 1000 + \left( 1000 \times \frac{5}{100} \right) + 50 = 1000 + 50 + 50 = 1100 §§
    • Cost per Microloan:
      • §§ \text{Cost per Microloan} = \frac{1100}{12} \approx 91.67 §§

When to use the Cost per Microloan Calculator?

  1. Microfinance Analysis: Understand the cost implications of microloans for personal or business use.

    • Example: Evaluating the affordability of a microloan for a small business.

  2. Financial Planning: Assess monthly repayment obligations when considering a microloan.

    • Example: Planning monthly budgets based on expected loan repayments.

  3. Comparative Analysis: Compare different microloan offers based on total repayment and monthly costs.

    • Example: Analyzing offers from various lenders to find the best deal.

  4. Investment Decisions: Determine the cost-effectiveness of microloans as an investment strategy.

    • Example: Evaluating the potential returns from lending to micro-entrepreneurs.

  5. Educational Purposes: Learn about the financial implications of borrowing and lending.

    • Example: Teaching financial literacy concepts related to loans and interest.

Practical examples

  • Small Business Owner: A small business owner might use this calculator to determine how much they will need to pay monthly if they take out a microloan to expand their operations.
  • Individual Borrower: An individual considering a microloan for personal use can assess whether the monthly payments fit within their budget.
  • Microfinance Institutions: Organizations providing microloans can use this calculator to explain repayment structures to potential borrowers.

Definitions of Terms Used in the Calculator

  • Loan Amount: The total sum of money borrowed from a lender.
  • Loan Term: The duration over which the loan must be repaid, typically expressed in months.
  • Interest Rate: The percentage charged on the loan amount, usually expressed annually.
  • Fees: Additional costs associated with the loan, which may include processing fees, service charges, or other expenses.

Use the calculator above to input different values and see the cost per microloan change dynamically. The results will help you make informed decisions based on your financial situation.