money

Online financial calculators are a hit or miss

Unless you really know and trust the organisation that is behind the development of those calculators, you can’t really trust the results

13:05 February 10, 2018

I am a big fan of calculators. For me, they present everything cool about technology: convenience and not having to do math. What else could I ask for?

But online calculators that are designed to help you calculate complex financial products like loans are a hit or miss. I am not talking here about a regular calculator like the one that is preinstalled on your computer or mobile devices. There are many other calculators that are developed for mortgages, savings, auto payments and other financial products are often as good as their source. Unless you really know and trust the organisation that is behind the development of those calculators, you can’t really trust the results.

In addition, many of these calculators don’t take into consideration fees, charges, costs, which can be significant and vary significantly from one market to another — and even within the same market from one provider to another. So if you want to get an estimate from an online calculator for a financial product, make sure you check the following.

Find the source

If you’re looking for online calculators like mortgage calculators, you may come across many websites that cover the US market, these may not be accurate for where you’re looking to take the mortgage or invest. For example, default settings may refer to the most common scenarios or lender requirements.

You better be checking local lender calculators or those affiliated with local platforms. By doing so, you will be able to ensure that they are relevant to your situation and market, regardless to which financial product you’re looking for.

Also check out the source as a reliable lender or wealth management company. While you won’t be able to take those numbers to the bank anyway, you still don’t want to waste your time with scenarios that can never materialise.

Know the traps

You should almost never pay to use an online calculator related to any aspect of your financial planning. If you’re asked to pay or enter personal information or credit card information, stop. Because of the popularity of online financial calculators, shady websites could promise immediate access while trying to capture your personal or financial information. Risks of doing so include credit card fraud and identity theft — you certainly are not looking for either.

There are plenty of reliable products out there. So take your time to find a trustworthy provider. To calculate a payment for a mortgage or an car loan, for example, you don’t need to enter any personal information or details — except for the location — in some cases. So be cautious when it comes to websites that try to get as much information as possible about you.

In less risky situation, entering information like email or address may make you target for excessive marketing. So it depends on your tolerance for having your inbox flooded by promotional emails or receiving direct mail.

Consider them just one aspect

Online calculators can be fun because they give you an immediate answer to your financial questions. Fancying buying a home, you probably can find in seconds a calculator that tells you how much you can afford, how much your payment will be, and even when it will make sense for you to sell your house. But that is one aspect of your research for any financial product.

You should always look at all the other areas that cannot be calculated automatically. In the case of buying a home, check with your lender regarding closing costs, insurance requirements and additional fees and charges, like taxes. All of those can add significantly to your costs and they won’t appear on a simply calculation.

The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.

Using online financial calculators

Know who is behind them

Use local, reliable, trustworthy providers

Don’t enter personal information

Do comprehensive research

— R.O.