What is the best way to say/use "Understand"
わかります/わかりました
or
なるほど
or
Is there something else more common? (If so can you give me an example of when to you would use it.)

Question

Answer

わかります means "I understand it so far/know your feeling".
わかりましたis most common i think. 
なるほどis good too.

Alternatives...
了解(りょうかい)ですis like "roger, copied." but used commonly.
オッケー(okay!) also works, but sounds very casual.