Enter the principal loan amount, monthly payment, total number of monthly payments, and total fees and charges into the calculator to determine the true cost of the loan or mortgage.

True Cost Formula

The following formula is used to calculate the true cost of a loan or mortgage. 

TC = P + (MP * n) + F

Variables:

  • TC is the true cost of the loan or mortgage
  • P is the principal loan amount
  • MP is the monthly payment n is the total number of monthly payments
  • F is the total fees and charges associated with the loan or mortgage

To calculate the true cost of a loan or mortgage, multiply the monthly payment by the total number of monthly payments. Add this result to the principal loan amount and the total fees and charges associated with the loan or mortgage. The result is the true cost of the loan or mortgage.

What is a True Cost?

True cost refers to the comprehensive cost of a product or service, including all direct and indirect costs associated with its production, delivery, and maintenance. It encompasses not only the obvious costs like materials and labor, but also hidden costs such as environmental impact, social implications, and long-term consequences. The concept of true cost is often used in discussions about sustainability and ethical business practices, as it provides a more accurate picture of the real impact of economic activities.

How to Calculate True Cost?

The following steps outline how to calculate the True Cost of a loan or mortgage.

  1. First, determine the principal loan amount (P).
  2. Next, determine the monthly payment (MP).
  3. Next, determine the total number of monthly payments (n).
  4. Next, determine the total fees and charges associated with the loan or mortgage (F).
  5. Finally, calculate the True Cost (TC) using the formula: TC = P + (MP * n) + F.
  6. After inserting the variables and calculating the result, check your answer with a calculator.

Example Problem:

Use the following variables as an example problem to test your knowledge:

Principal loan amount (P) = $10,000

Monthly payment (MP) = $500

Total number of monthly payments (n) = 24

Total fees and charges (F) = $1,000