Advanced Personal Loan Calculator
Where Can I Get a Personal Loan?
You can get a personal loan from online lenders, credit unions, and banks. If you’re shopping for a personal loan, here’s a quick look at your options for providers:
Online lenders: Getting a personal loan online can often result in better interest rates. Online lenders often offer benefits like competitive rates, low/no fees, and flexible payment options. In addition, the online option can be the fastest and most convenient way to get a personal loan.
Banks: Banks typically have higher interest rates and tougher lending requirements than credit unions, but you don’t have to worry about the membership issues. And, if you’re already a customer at the bank—especially a local community bank—you might get perks like lower rates or being able to qualify for a bigger loan.
Credit Unions: Credit unions offer financial services to people who live, study, work, or worship in the community. To apply for a personal loan, you’ll have to be a member of the credit union, and you may be required to have a minimum savings account balance. Still, credit unions often have attractive rates, and they tend to be more willing to work with borrowers who have lower credit scores and thin credit histories.
How to Calculate Payments for Your Personal Loan
To use the personal loan calculator, enter a few details about the loan:
- Loan amount: How much money you want to borrow.
- Loan term: How much time you’ll have to pay back the loan.
- Interest rate: How much money the lender will charge you to borrow the money, expressed as a percentage of the loan. If you don’t know the interest rate, enter your credit score range to see an interest rate estimate.
Once you enter your loan details, the personal loan calculator displays three numbers: total interest, total paid, and monthly payment. You can use them to evaluate and compare personal loans.
- Total interest paid: The total interest you pay over the life of the loan. Borrowers with higher credit scores typically pay less interest overall than those with poor credit.
- Total paid: The total amount you pay to the lender, including the original amount you borrowed—known as the “principal”—plus the interest. This amount doesn’t include any additional fees your lender may charge (see below).
- Monthly payment: How much you can expect to pay each month for the duration of the loan term. Part of each payment is applied to interest, and part goes toward the principal, according to an amortization schedule.
If you choose a longer loan term, your monthly payment will be lower, and your total interest will be higher. With a shorter loan term, your monthly payment will be higher, but your total interest will be lower.
Here’s how the payment details change depending on the loan term you choose, assuming a $10,000 loan at 10% interest:
| Loan Term | Monthly Payment | Total Interest Paid | Total Paid |
|---|---|---|---|
| 12 months | $879.16 | $549.91 | $10,549.91 |
| 24 months | $461.45 | $1,074.78 | $11,074.78 |
| 36 months | $322.67 | $1,616.19 | $11,616.19 |
| 48 months | $253.63 | $2,174.04 | $12,174.04 |
| 60 months | $212.47 | $2,748.23 | $12,748.23 |
In addition to interest, your lender may charge personal loan fees that may not be included in the personal loan calculator results. They might include:
- Origination fee: A one-time fee your lender charges to cover its loan-processing costs. Origination fees vary by lender and typically range between 1% and 8% of the total loan amount, depending primarily on your credit history. Origination fees can be added to the loan balance or subtracted from the loan amount—which means you could end up with less cash.1
- Late fee: You may owe a late fee if you don’t make your monthly payments on time (your loan agreement will outline the details). Late fees add up, and late payments can hurt your credit score. It’s a good idea to set up a system to make sure you pay on time every month.
- Prepayment penalty: If you repay a loan ahead of schedule, your lender may charge a fee to make up for the lost interest. Lenders are required by law to disclose prepayment fees before you receive a loan, so be sure to read the details—especially if you’re planning to pay off the loan early.
How Is the Interest Calculated on a Personal Loan?
Each monthly payment you make consists of two parts:
- An interest portion that goes to the lender
- The principal portion that pays down your balance
Your monthly payment stays the same for the life of the loan. However, the amounts that go toward interest and principal change. That’s because, with amortized loans, the interest portion of the monthly payment depends on how much you still owe.
When you first get a loan, the interest payments are larger because the balance is larger. As your balance gets smaller, the interest payments get smaller—and more of your payment goes toward paying off the loan. When you use a personal loan calculator, you will see the average and total cost of these interest payments.
Here’s a sample amortization schedule for a 12-month, $1,000 loan with a 15% interest rate:
| Payment Month | Total Monthly Payment | Principal Payment | Interest Payment | Total Interest | Remaining Balance |
|---|---|---|---|---|---|
| 1 | $90.26 | $77.76 | $12.50 | $12.50 | $922.24 |
| 2 | $90.26 | $78.73 | $11.53 | $24.03 | $843.51 |
| 3 | $90.26 | $79.71 | $10.54 | $34.57 | $763.80 |
| 4 | $90.26 | $80.71 | $9.55 | $44.12 | $683.09 |
| 5 | $90.26 | $81.72 | $8.54 | $52.66 | $601.37 |
| 6 | $90.26 | $82.74 | $7.52 | $60.18 | $518.63 |
| 7 | $90.26 | $83.78 | $6.48 | $66.66 | $434.85 |
| 8 | $90.26 | $84.82 | $5.44 | $72.09 | $350.03 |
| 9 | $90.26 | $85.88 | $4.38 | $76.47 | $264.14 |
| 10 | $90.26 | $86.96 | $3.30 | $79.77 | $177.19 |
| 11 | $90.26 | $88.04 | $2.21 | $81.99 | $89.14 |
| 12 | $90.26 | $89.14 | $1.11 | $83.10 | $0.00 |
An easy way to multiply by a percentage is to multiply the two numbers (for example, $1,000 x 1.25) and then divide by 100. So, $1,000 x 1.25 = $1,250; then $1,250 ÷ 100 = $12.50.
What Is the Average Interest Rate on a Personal Loan?
When you use a personal loan calculator, the interest rates will be different for each loan. They will vary by state, lender, and other factors, including your:
- Credit score
- Credit history
- Income
- Debt-to-income (DTI) ratio
- Loan term
The average interest rate for a 24-month personal loan was 10.32% as of June 2023, according to Federal Reserve data. Meanwhile, the national average interest rate for a 36-month personal loan was 10.02% at credit unions and 10.75% at banks as of Q1 2023, according to the National Credit Union Administration.23
Interest rates for personal loans vary considerably depending on your credit score. In general, the higher your credit score, the lower your interest rate on your personal loan.
How Do You Calculate Payments on a Personal Loan?
You can calculate your monthly loan payment yourself without using an online personal loan calculator. Divide the total amount you’ll pay (including the principal and interest) by the loan term (in months). For example, say the total amount you’ll pay is $1,000, and the loan term is 12 months. Your monthly loan payment would be $83.33 ($1,000 ÷ 12 = $83.33).
In general, your monthly payment stays the same for the entire loan term.
You can calculate the monthly interest payment by dividing the annual interest rate by the loan term in months. Then, multiply that number by the loan balance. So, for a 12-month, $1,000 loan with a 15% interest rate, your first month’s interest payment would be $12.50 (1.25% x $1,000). The second month’s interest would be $11.53 (1.25% x $922.24), and so on.
Your payment may change if you ask your lender for a deferment. A deferment allows you to take a scheduled break from payments if you have a financial hardship. For example, you may experience a job loss, medical emergency, or national emergency.
Keep in mind that the interest may continue to accrue during the deferment period. If it does, you’ll have a higher total amount to pay off. You may have a higher monthly payment or a longer loan term (or both). If you’re getting a deferment, clarify the terms with the lender before you agree to it.
Why Use a Personal Loan Calculator
Investopedia’s personal loan calculator can show you what your monthly payment, total interest paid, and total paid amounts might be, based on a specific loan. After calculating, you can:
- Try different scenarios before you commit to a loan. Be sure to try different loan-term lengths to see how that affects your monthly payment and total interest.
- See if the monthly payment fits into your budget. If the payment is too high, try a longer loan term.
- Decide if you’re willing to pay the total amount of interest in exchange for the loan. If it’s too high, try a shorter loan term.
If changing the loan term length doesn’t get you the loan you want, you may be able to lower your loan costs if you:
- Borrow less money
- Shop around with different lenders
- Improve your credit score before you apply for a loan
What Are Common Term Lengths for a Personal Loan?
Personal loans have different term lengths, but most are two-year or five-year loans. Still, you can find personal loans with longer payback periods, like 15 years.
Who Has the Best Rates on Personal Loans?
The best rates on personal loans are often found with online lenders. Credit unions typically offer the next most affordable rates, with traditional banks being the most expensive. The interest rate is highly dependent on your credit history, however. You’ll likely find a fair rate from any of these sources if you have good credit. If you have bad credit, you may find it more difficult to get a loan from a bank or credit union.
Are there Penalties if I Pay Off My Loan Early?
Some loans may incur a penalty charge if you pay off your personal loan early since that deprives them of earning the total interest. Read the fine print on your loan agreement and ask your loan officer if there are any early payment penalties before you sign your loan documents.
What You Need to Know When Applying for a Personal Loan
Personal loans can be a valuable tool for financing various expenses, such as consolidating debt, making large purchases, or covering unexpected costs. But before diving in, it’s crucial to understand the process, requirements, and potential impact on your finances. Here’s a guide to help you navigate the essentials of applying for a personal loan.
1. Understand What a Personal Loan Is
A personal loan is a lump sum of money that you borrow from a lender and repay over a fixed term, typically ranging from one to five years. Unlike secured loans (like mortgages or car loans), personal loans are usually unsecured, meaning you don’t need to put up collateral. However, your creditworthiness will play a significant role in determining your approval, interest rate, and loan terms.
2. Define Your Purpose for the Loan
Lenders may ask for the purpose of your loan, and knowing why you’re borrowing can guide you in choosing the right loan product. Common uses for personal loans include:
- Debt consolidation (combining multiple debts into one payment),
- Home improvement projects,
- Medical expenses or emergencies,
- Wedding or travel expenses.
Having a clear purpose helps you assess if a personal loan is the best option or if alternatives like a credit card or line of credit might be more suitable.
3. Check Your Credit Score
Your credit score is one of the biggest factors lenders consider when deciding on approval and interest rates. Generally, higher credit scores qualify for lower rates, making the loan less expensive over time. Here’s a breakdown of typical credit score ranges:
- Excellent (720+): You’re likely to get the best rates and terms.
- Good (690-719): You should still have access to favorable rates.
- Fair (630-689): You might qualify, but expect higher interest rates.
- Poor (below 630): Approval may be challenging, and rates will be high.
Example: If your score is around 750, you might qualify for a rate of around 7%, while a score of 650 could mean an interest rate closer to 15%. Checking your score beforehand allows you to take steps to improve it if needed, such as paying off small debts or correcting errors on your report.
4. Determine How Much You Need to Borrow
Calculate how much you need, keeping in mind that you’ll repay it with interest. Borrowing more than necessary increases your debt load and the amount of interest you’ll pay. Consider fees and any potential hidden costs (like origination fees) when calculating your loan amount.
Example: If you need $10,000 for a home improvement project, factor in any lender fees that might affect the total disbursement, ensuring you have enough funds to complete your project without overshooting.
5. Research Different Types of Lenders
Personal loans are available from various lenders, each with unique benefits:
- Banks: Traditional banks may offer competitive rates but have stricter requirements. If you have a strong relationship with your bank, you might get better terms.
- Credit Unions: Often offer lower rates and more flexibility, especially for members. They’re also known for a more personalized approach to lending.
- Online Lenders: These often have streamlined applications, faster funding, and competitive rates. Some online lenders specialize in borrowers with lower credit scores.
Example: You might get a better rate and faster processing time with an online lender like SoFi than with a traditional bank. However, if you’re a member of a credit union like Navy Federal, you may access lower rates and more flexibility.
6. Compare Interest Rates and Fees
Interest rates vary widely depending on the lender and your credit score, so shopping around can save you money. Remember to consider both APR (annual percentage rate) and interest rate. APR includes the interest rate plus any additional fees, giving you a more accurate cost of the loan.
Example: If you’re choosing between a loan with a 10% APR and no fees versus a loan with an 8% APR and a 3% origination fee, calculate the total cost to decide the better deal.
7. Evaluate Loan Terms and Monthly Payments
Loan terms impact your monthly payment and total cost. Longer terms mean lower monthly payments but higher total interest paid over the life of the loan, while shorter terms have higher monthly payments but lower overall interest costs.
Example: A $10,000 loan at 10% interest would have these potential payment structures:
- 12 months: $879/month, $549 in total interest.
- 36 months: $322/month, $1,616 in total interest.
- 60 months: $212/month, $2,748 in total interest.
Select a term that balances an affordable monthly payment with a manageable total interest cost.
8. Understand the Application Requirements
When applying for a personal loan, you’ll typically need to provide the following:
- Proof of identity (such as a driver’s license or passport),
- Proof of income (pay stubs, tax returns, or bank statements),
- Proof of address (utility bill or lease agreement).
9. Prepare for a Hard Credit Inquiry
Once you submit a formal application, lenders will perform a hard credit check, which may temporarily reduce your credit score by a few points. If you’re shopping around, try to apply within a short timeframe (usually 14-45 days) to avoid multiple credit checks from impacting your score.
10. Beware of Loan Fees
Fees can increase the cost of a personal loan, so pay close attention to the fine print:
- Origination fee: Charged upfront for processing the loan, often ranging from 1% to 8%.
- Late payment fee: Charged if you miss a payment, which can also impact your credit score.
- Prepayment penalty: Charged by some lenders if you pay off the loan early.
Example: If you borrow $5,000 with a 5% origination fee, you’d receive $4,750 after fees are deducted.
11. Calculate Your Monthly Payment and Budget Accordingly
Use a loan calculator to determine your monthly payment and assess if it fits your budget. Be realistic about your ability to make consistent payments, considering your other financial obligations.
Example: If your budget only allows for an additional $300 per month, avoid loan terms that require higher payments to avoid potential financial strain.
12. Consider the Long-Term Impact on Your Finances
Taking on debt affects your financial flexibility. Think about how this loan will impact your ability to save, invest, or handle emergencies. A high-interest loan could be a burden if you don’t have a solid repayment plan.
13. Read the Fine Print Before Signing
Ensure you understand every detail in your loan agreement, especially regarding interest rates, fees, and penalties. Ask questions if anything is unclear, and get everything in writing.
Final Thoughts
Applying for a personal loan can be a smart financial move when done thoughtfully and strategically. By understanding your needs, exploring different lender options, and carefully evaluating loan terms, you’ll be better prepared to choose the right personal loan for your situation.
FAQ’s
Where can I get a personal loan? You can get a personal loan from online lenders, banks, and credit unions. For example, an online lender like SoFi might offer lower rates than a traditional bank, while your local bank might offer a loan if you already have an account there.
What’s the benefit of getting a personal loan from an online lender? Online lenders like LendingClub can provide faster approval and flexible terms with fewer fees, making them a popular choice for those needing quick cash without visiting a branch.
Are banks a good place to get a personal loan? Yes, banks offer personal loans, and existing customers may qualify for lower rates. For instance, if you have a long-standing account with Chase, you might be eligible for a larger loan amount or better rates.
How do credit unions differ from banks for personal loans? Credit unions often have lower rates and are more flexible with credit scores. For example, PenFed Credit Union might offer lower interest to its members than a traditional bank would.
Can I apply for a personal loan without visiting a branch? Yes, with online lenders like Marcus by Goldman Sachs, you can apply entirely online and receive funds quickly.
What’s the average interest rate for a personal loan? Interest rates vary based on credit scores and loan terms, but they usually range from 10% to 25%. For instance, someone with good credit might secure a 10% rate, while those with poor credit may face a rate around 20%.
How does my credit score affect my loan options? A higher credit score often leads to lower interest rates. For example, someone with a 750 score may receive a 7% rate, while a score of 600 might result in a 15% rate.
What fees should I expect with a personal loan? Fees can include origination fees, late fees, and prepayment penalties. For instance, LendingTree charges an origination fee between 1% and 6% of the loan amount.
Can I get a loan from my bank if I have a low credit score? Banks are stricter with credit scores, but some, like Capital One, might offer options with a secured personal loan if you have low credit.
What are personal loan term options? Terms can range from 12 to 60 months. A shorter loan term of 12 months might mean higher payments but less interest, while a 60-month term has lower payments but more interest over time.
Is a credit union membership required to get a loan? Yes, you must be a member to get a loan from a credit union, like Navy Federal. Membership requirements vary but are often based on location or employer.
Can I get a personal loan with a co-signer? Yes, some lenders, like LightStream, allow co-signers to help those with lower credit scores qualify for loans.
What’s an origination fee? It’s a fee for processing the loan, usually 1% to 8%. For example, if you borrow $5,000 with a 5% fee, $250 may be deducted, giving you $4,750.
How can I use a personal loan calculator? Enter the loan amount, term, and interest rate to see your total cost. For instance, if you borrow $10,000 at 10% for 24 months, your monthly payment would be about $461.
What’s a prepayment penalty? Some lenders charge a fee for early repayment. If you pay a $5,000 loan early and the lender charges a $100 prepayment fee, that reduces your interest savings.
Are online lenders more flexible with credit scores? Many online lenders like Upstart are more lenient and consider factors beyond credit scores, like employment and education.
How long does it take to get approved for a personal loan? Online lenders often approve loans within 24 hours, while banks might take a few days. For example, with SoFi, you may receive funds the next business day.
Can I refinance a personal loan? Yes, some lenders allow refinancing to reduce rates or extend terms. For example, if your score improves, you might refinance from a 15% rate to a 10% rate.
Do banks offer better rates for existing customers? Yes, some banks offer loyalty rates. For example, Bank of America provides interest rate discounts for customers with existing accounts.
How can I improve my chances of getting a low-interest loan? Boosting your credit score, reducing debt, or applying through a credit union can help. For instance, a credit union may approve you with a 650 score when a bank might require 700.
Is there a maximum amount I can borrow? Loan amounts vary, with some lenders offering up to $100,000. For example, if you’re consolidating credit card debt, you might be able to borrow $50,000 from an online lender like Marcus.
What’s an example of using a personal loan for debt consolidation? If you have three credit cards with high interest, you could consolidate them into a single loan with a lower rate, saving money on interest.
How do late fees work with personal loans? If you miss a payment, lenders may charge a fee, often $15 to $40. Regular late payments can also impact your credit.
Do credit unions offer better rates for military members? Some credit unions, like Navy Federal, offer exclusive rates and services for military members, often lower than traditional banks.
How does income affect my loan approval? Higher income often increases approval chances. For example, a $60,000 salary might qualify for a larger loan than a $30,000 salary due to lower risk.
How can I calculate total loan cost over time? Add principal, interest, and fees to get the total. For instance, a $10,000 loan at 12% over 24 months might cost $1,320 in interest.
Is a personal loan better than a payday loan? Yes, personal loans generally have lower interest and are more manageable. For example, a $1,000 payday loan might have a 300% APR, while a personal loan is typically under 30%.
Can I use a personal loan for a large purchase? Yes, many people use personal loans for purchases like home renovations or vacations. For example, a $15,000 loan could fund a kitchen remodel with fixed payments.
Are there any tax benefits to personal loans? Generally, personal loan interest isn’t tax-deductible unless it’s for home improvements on your primary residence, in which case you should consult a tax advisor.
Can I apply for multiple loans to compare rates? Yes, but try to do this within a short period to minimize credit score impact. Many lenders offer pre-qualification to check rates without a hard inquiry.