Tutorial: Loan Calculator
This tutorial shows how to use the 7cows loan calculator to analyze loans, mortgages, and other financial products. You'll learn how to input parameters, interpret results, and share calculations with others.
The calculator at 7cows.io/cf helps you understand how loans work by letting you experiment with different parameters and see the results instantly.
The Four Parameters
Every loan can be described by four key parameters. If you know any three of them, the calculator will find the fourth:
| Parameter | Description |
|---|---|
| Principal | The loan amount (how much you borrow) |
| Interest Rate | The annual interest rate |
| Loan Maturity | How long you have to repay the loan |
| Regular Payment | The amount you pay each period |
The "Find" column (radio buttons) lets you choose which parameter to calculate. By default, the Interest Rate is calculated from the other three.
Simple Example
Let's start with a basic example: borrowing $100,000 and paying $1,000 per month for 10 years.
| Parameter | Value |
|---|---|
| Principal | $100,000 |
| Loan Maturity | 10 years |
| Regular Payment | $1,000/month |
| Interest Rate | 3.74% (calculated) |
With these parameters, you'll pay a total of $120,000 over 10 years ($1,000 × 12 months × 10 years), meaning $20,000 goes toward interest.
Understanding the Results
KPIs (Key Performance Indicators)
After calculating, you'll see several KPIs on the left side:
| KPI | Value | Meaning |
|---|---|---|
| EAPR | 3.46% | Effective Annual Percentage Rate - the true cost of the loan |
| Period | 10 years | Total loan duration |
| Payback per $1 | $0.20 | For every dollar borrowed, you pay 20 cents in interest |
| Interest to pay | $20,000 | Total interest over the loan lifetime |
The EAPR (Effective Annual Percentage Rate) is particularly useful for comparing different loans, as it accounts for compounding effects.
Payment Schedule
The payment schedule shows how your payments are split between interest and principal repayment (amortization) each year:
Key observations:
- Year 0: Shows the initial loan disbursement (-$100,000)
- Early years: More of your payment goes toward interest
- Later years: More goes toward reducing the principal
- Final year: The outstanding balance reaches $0
You can switch between "Aggregated" (yearly) and "Monthly" views, and download the data as CSV.
Experimenting with Parameters
What happens if you double the monthly payment?
Intuition might suggest that doubling the payment halves the loan duration. Let's check:
| Scenario | Monthly Payment | Duration |
|---|---|---|
| Original | $1,000 | 10 years |
| Doubled | $2,000 | 4 years 7 months |
The loan is paid off in less than half the time! This is due to the compound effect - by paying more aggressively, you reduce the principal faster, which means less interest accrues.
Link to doubled payment calculation
What about scaling the loan?
Q: What happens to the interest rate if you multiply both the principal and monthly payment by 10?
A: Nothing - the interest rate stays the same!
The proportions matter, not the absolute amounts. A $1,000,000 loan with $10,000/month payments has the same interest rate as a $100,000 loan with $1,000/month payments.
Sharing Your Calculations
One of the most powerful features is the ability to share calculations via a link. Instead of describing loan parameters in words, you can simply share a permalink.
Product Permalink
Each loan configuration has a unique URL that captures all parameters. Click the link next to "Product permalink" to copy it.
Portfolio Permalink
When you have multiple products (loans), the portfolio permalink shares all of them together.
QR Code
A QR code is generated automatically, making it easy to share calculations on mobile devices or in printed materials.
Adding Multiple Products
Click "New Product" to add another loan to your portfolio. This is useful for: - Comparing different loan offers - Modeling a mortgage with multiple tranches - Analyzing debt consolidation scenarios
Each product gets its own card with parameters and calculations, and the portfolio KPIs show the combined effect.
Tips and Best Practices
- Use the "Example" button to quickly populate the form with sample values
- Change the frequency slider to model quarterly, semi-annual, or annual payments
- Download as CSV to analyze the payment schedule in Excel or Google Sheets
- Bookmark or share the permalink to save your calculations
Next Steps
- Try the Extended Calculator for loans with balloon payments (remaining debt at maturity)
- Explore the Swiss Mortgage Calculator for Switzerland-specific requirements
- Check the Examples page for real-world calculation scenarios