Personal Loan Calculator

Enter the amount, rate and term from a loan offer to see the monthly payment and how much of the total goes to interest. Turn on the fee and insurance options to model an origination fee, either taken out of the loan proceeds or paid at signing, and optional monthly insurance. The calculator then reports the annual percentage rate implied by those costs, which is the fairest way to compare offers that combine different rates and fees.

What are Personal Loans?

A personal loan is an installment loan from a bank, credit union or online lender that you can use for almost any lawful purpose. You receive a lump sum and repay it in equal monthly payments over a fixed term, typically one to seven years. Amounts usually range from about $1,000 to $50,000, though some lenders go higher for borrowers with strong credit. Most personal loans carry a fixed rate, so the payment never changes, and the schedule shows exactly when the debt will be gone.

Rates vary widely. Borrowers with excellent credit and stable income may be offered rates in the single digits, while applicants with weaker credit can see rates above 30%. The lender's quote reflects how likely it thinks you are to repay, the term you choose and sometimes whether you agree to automatic payments.

Lenders differ in how they fund and service loans. Banks often reserve their best personal loan rates for existing customers, credit unions cap rates on many loans and tend to be more forgiving of thinner credit files, and online lenders compete on speed, with decisions in minutes and funding as soon as the next business day. When a loan is for debt consolidation, some lenders pay your other creditors directly, and a few offer a small rate discount for doing so.

Secured personal loans. A secured loan is backed by collateral, such as a savings account, certificate of deposit or vehicle. Because the lender can take the collateral if you stop paying, secured loans are easier to qualify for and usually cost less. Share-secured and CD-secured loans from banks and credit unions are also a common way to build or repair a credit history.

Traditional personal loans. Most personal loans are unsecured: the lender relies on your credit history, income and existing debts rather than an asset. Missing payments will not cost you a specific possession, but it will damage your credit, add late fees and can lead to collection action or a lawsuit. Unsecured loans therefore carry higher rates than secured ones and require a stronger application.

Personal loans from peer-to-peer lenders. Peer-to-peer (P2P) platforms match borrowers with individual or institutional investors who fund the loans, with the platform handling underwriting, payments and collections. Prosper is one of the longest-running examples in the United States. Online marketplaces can approve applicants that traditional banks turn down and often fund within days, but rates and origination fees for riskier borrowers can be high, so compare the APR with offers from your bank or credit union.

Whichever kind of lender you use, a personal loan's fixed schedule is its main advantage over revolving credit. A credit card lets you carry a balance indefinitely; a personal loan forces the balance to zero by a set date.

Because the payment and end date are fixed, a personal loan is easy to plan around: the schedule above shows how each payment splits between interest and principal and the exact month the balance reaches zero. Paying extra toward principal, where the lender allows it without a penalty, shortens the schedule and reduces the interest you pay.

Why Use Personal Loans?

People most often take personal loans to consolidate higher-interest debt. Replacing several credit card balances near 20% to 25% with one loan at a lower fixed rate can cut interest and set a firm payoff date. Other common uses include:

• Home repairs and improvements, especially when there is little home equity to borrow against.
• Large or unexpected expenses such as medical bills, a move, a funeral or major car repairs.
• Planned purchases like a wedding or appliances, where a fixed payment is easier to budget than a card balance.

Try to avoid fraudulent or predatory loans. Be wary of any lender that guarantees approval without checking your credit, asks for an upfront fee before releasing the funds, pressures you to sign quickly or asks to be paid by gift card or wire transfer. Legitimate lenders deduct fees from the loan or include them in the disclosed APR. Payday and car title loans are legal in many states but can carry APRs of several hundred percent. You can check a lender's licensing with your state's financial regulator and look up complaints with the Consumer Financial Protection Bureau.

Personal Loans and Creditworthiness

Lenders judge creditworthiness mainly from your credit score and report, your income and job stability, and your debt-to-income ratio, the share of gross monthly income already committed to debt payments. Many lenders prefer a ratio below about 36% and a FICO score of 670 or higher for their better rates, though some specialise in fair or poor credit. If your profile is weak, a co-signer with stronger credit, a secured loan or a smaller amount can improve your chances and the rate offered.

Personal Loan Application

Start by checking your credit reports for errors at AnnualCreditReport.com and paying down card balances if you can, since utilisation affects your score. Then prequalify with several lenders. Prequalification uses a soft credit inquiry, which does not affect your score, and shows an estimated rate, term and fee. Compare offers by APR and total cost rather than the monthly payment alone.

When you choose a lender, the formal application triggers a hard inquiry. Expect to provide identification, proof of address, recent pay stubs or tax returns, and details of your employer and existing debts. Approval can take minutes online or a few days at a bank, and funds usually arrive by direct deposit within one to five business days.

Before signing, read the loan agreement for the APR, any origination, late or prepayment fees, and the exact payment date. Setting up automatic payments avoids late fees and sometimes earns a small rate discount.

Personal Loan Fees

The interest rate is only part of the price. Use the fee options above to see how these charges move the APR:

• Origination fee: a one-time charge, often 1% to 10% of the loan, usually deducted from the proceeds. On the default $20,000 loan, a 5% fee means you receive $19,000 but repay $20,000, raising the APR from 10% to about 12.2%.
• Prepayment fee: a penalty for paying the loan off early. Many personal lenders no longer charge one, but check the agreement.
• Late payment fee: a flat amount or percentage charged when a payment is late, plus possible damage to your credit if it is 30 or more days overdue.

PMT = P × r ÷ [1 − (1 + r)⁻ⁿ]

P

amount borrowed

r

monthly rate (annual rate ÷ 12)

n

number of monthly payments

The real APR is the annual rate at which the payments (plus any required insurance) exactly repay the cash you actually receive after fees.

Personal Loan Alternatives

A personal loan is not the only way to cover a large expense. Depending on your situation, consider:

• Borrowing from family or friends, with a written agreement that sets out the amount, rate and repayment schedule.
• Asking a creditworthy relative or partner to co-sign, which can unlock a lower rate.
• A credit card with a 0% introductory APR on purchases or balance transfers, if you can repay before the promotion ends.
• Borrowing against assets you already own, such as a home equity loan or line of credit, or a loan against a savings account or CD.
• Help from local nonprofits, community organisations, employers or credit union hardship programs.
• Crowdfunding from friends, family and supporters for medical bills or other emergencies.

Frequently asked questions

Sources

• Consumer Financial Protection Bureau
• FTC Consumer Advice
• AnnualCreditReport.com