Personal Loan Calculator
Use our personal loan calculator to estimate your monthly payments, total interest costs, and amortization schedule. Plan your finances better by understanding the full cost of your loan before you borrow.
Personal Loan Calculator
Calculate monthly payments and total interest for your personal loan
Loan Information
What is a Personal Loan?
A personal loan is a fixed-amount loan that is distributed as a lump sum and repaid in installments over a specified period. Personal loans typically have fixed interest rates, meaning the interest rate remains the same throughout the loan term.
These loans can be used for various purposes such as debt consolidation, home improvements, major purchases, medical expenses, or unexpected costs. Unlike mortgages or auto loans, personal loans are usually unsecured, meaning they don't require collateral.
Personal Loan Calculation Formula
The monthly payment (PMT) for a personal loan is calculated using the following formula:
$$PMT = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1}$$
- PMT: Monthly payment amount
- P: Principal loan amount
- r: Monthly interest rate (annual rate divided by 12 or payment periods per year)
- n: Total number of payments (loan term in years multiplied by payment periods per year)
Understanding APR (Annual Percentage Rate)
The Annual Percentage Rate (APR) represents the true cost of borrowing money, including interest and fees, expressed as an annual percentage. The APR is typically higher than the stated interest rate because it includes upfront fees and other loan costs.
When fees are included in a loan, the effective APR is calculated based on the actual amount received (loan amount minus fees) rather than the nominal loan amount.
For loans with fees, we use an iterative process to determine the APR by finding the rate that makes the present value of all loan payments equal to the loan amount received after fees.
How to Use This Personal Loan Calculator
- Enter the loan amount - The total amount you wish to borrow.
- Specify the interest rate - The annual interest rate for the loan.
- Set the loan term - The duration over which you'll repay the loan (in years and months).
- Include any fees (optional) - Check the box to include application fees and insurance costs.
- Click 'Calculate' - Review your monthly payment, total interest costs, and amortization schedule.
Types of Personal Loans
Personal loans come in various forms, each designed for different needs and financial situations. Understanding these types can help you choose the most appropriate one for your circumstances.
Secured Personal Loans
Secured loans require collateral, such as a savings account, certificate of deposit, or vehicle. Because the lender has a form of security, these loans typically offer lower interest rates but risk losing your collateral if you default.
Unsecured Personal Loans
Unsecured loans don't require collateral and are approved based on your creditworthiness. They typically have higher interest rates than secured loans but pose no risk to your assets. Most personal loans are unsecured.
Frequently Asked Questions
What factors affect the interest rate on my personal loan?
The interest rate on a personal loan is primarily determined by your credit score, income, debt-to-income ratio, loan amount, loan term, and whether the loan is secured or unsecured. Lenders also consider market conditions and their internal policies.
Can I pay off my personal loan early?
Yes, most personal loans can be paid off early. However, some lenders charge prepayment penalties. Check your loan agreement for these terms. Paying off early saves on interest costs but may affect your credit history's length.
How does a personal loan affect my credit score?
A personal loan can affect your credit score in several ways. Initially, the lender's hard inquiry might cause a slight dip. Over time, making regular payments can improve your score, while missed payments can significantly damage it. A personal loan also adds to your credit mix, which can be positive if managed well.
What's the difference between a personal loan and a credit card?
Personal loans provide a lump sum with fixed monthly payments and typically lower interest rates than credit cards. Credit cards offer revolving credit with variable payments and higher rates but greater flexibility for ongoing expenses. Personal loans are better for one-time large expenses, while credit cards suit recurring smaller purchases.
How long does it take to get approved for a personal loan?
The approval process for personal loans varies by lender. Online lenders may approve loans within minutes to hours, with funding in 1-3 business days. Traditional banks and credit unions typically take 1-7 business days for approval and funding. Factors affecting timing include your creditworthiness, documentation requirements, and the lender's verification processes.