Personal Loan Calculator

Loan Amount
Interest Rate
Insurance/month
Loan Term
years
months
Start Date

Origination Fee
Paid
Is a
Amount $%

Monthly Pay:   $212.47

Total of 60 Loan Payments$12,748.23
Total Interest$2,748.23
Origination Fee$500.00
Total Interest + Fee$3,248.23
Actually Received$9,500.00
Real APR12.240%
Payoff DateDec. 2023

Payment Breakdown

Loan Amortization Graph

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The Personal Loan Calculator can give concise visuals to help determine what monthly payments and total costs will look like over the life of a personal loan. Since most personal loans come with fees and/or insurance, the end cost for them can actually be higher than advertised. The calculator takes all of these variables into account when determining the real annual percentage rate, or APR for the loan. Using this real APR for loan comparisons is most likely to be more precise.

What are Personal Loans?

Personal loans are loans with fixed amounts, interest rates, and monthly payback amounts over defined periods of time. Typical personal loans range from $5,000 to $35,000 with terms of 3 or 5 years in the U.S. They are not backed by collateral (like a car or home, for example) as is typical for secured loans. Instead, lenders use the credit score, income, debt level, and many other factors to determine whether to grant the personal loan and at what interest rate. Due to their unsecured nature, personal loans are usually packaged at relatively higher interest rates (as high as 25% or more) to reflect the higher risk the lender takes on.

Secured Personal Loans

Although uncommon, secured personal loans do exist. They are usually offered at banks and credit unions backed by a car, personal savings, or certificates of deposits as collateral. Like all other secured loans such as mortgages and auto loans, borrowers risk losing the collateral if timely repayments are not made. Generally, the maximum loan limit is based on the collateral the borrower is willing to put up. Most online lenders only offer unsecured personal loans. While the Personal Loan Calculator is mainly intended for unsecured personal loans, it can be used for secured personal loans as long as the inputs correctly reflect the loan conditions.

Traditional Personal Loans

Before the arrival of the internet, personal loans were generally provided by banks, credit unions, and other financial institutions. They are able to profit off this system by taking in money in the form of savings accounts, checking accounts, money market accounts, or certificates of deposit (CDs), and lending the money back out at higher interest rates. Pawn shops and cash advance stores also provide personal loans at high interest rates.

Personal Loans from P2P Lenders

The advent of the internet introduced a new way of lending, shaping the landscape of the personal loan industry. Instead of borrowers going to lending institutions that provide personal loans (as is done traditionally), borrowers can now go to online financial service companies that match them up with lenders directly. The majority of these lenders are regular people with some extra money to invest. The entire process is called peer-to-peer lending, or abbreviated as P2P lending. P2P borrowers generally offer loans with more favorable terms because of the relatively low risk and low cost for the P2P service providers. P2P service providers generally operate only through a website, which is much cheaper to run than a brick-and-mortar bank or credit union. Also, P2P service providers do not directly lend, but act instead as middlemen and take a small cut of all transactions. The lenders bear the loss when borrowers default. As a result, these P2P service providers operate with very low risk.

Why Use Personal Loans?

About half of all personal loans are used for debt consolidation. The interest rates of personal loans are normally lower than credit cards, making personal loans a great vehicle through which a person could consolidate credit card debt or other debts sitting at higher interest rates. When deciding to take a personal loan for debt consolidation, the fees should be fully considered. The fee included APR is a better reference than the interest rate for comparison purposes. Other common uses of personal loans include the payment medical bills, home renovations, small business expansions, vacations, weddings, and other larger purchases. The following are a number of more specific examples of uses of personal loans:

Try to Avoid Fraudulent or Predatory Loans

Unfortunately, fraudulent or predatory lenders do exist. Firstly, it is unusual for a lender to extend an offer without first asking for credit history, and a lender doing so may be a telltale sign to avoid them. Loans advertised through physical mail or by phone have a high chance of being predatory. The same is often said for auto title loans, cash advances, no-credit-check loans, and payday loans. Generally, these loans come with very high interest rates, exorbitant fees, and very short payback terms.

Personal Loans and Creditworthiness

The creditworthiness of an individual is probably the main determining factor affecting the grant of a personal loan. Good or excellent credit scores are important, especially when seeking personal loans at good rates. People with lower credit scores will find few options when seeking a loan, and loans they may secure usually come with unfavorable rates. Like credit cards or any other loan signed with a lender, defaulting on personal loans can damage a person's credit score. Lenders that look beyond credit scores do exist; they use other factors such as debt-to-income ratios, stable employment history, etc.

Personal Loan Application

The application process is usually fairly straightforward. To apply, the lenders normally ask for some basic information including personal, employment, income, and credit report information, among a handful of other things. This information will most likely come from documents such as income tax returns, recent pay stubs, W-2 forms, or a personal financial statement. Many lenders today allow borrowers to submit applications online. After submission, information is assessed and verified by the lender. Some lenders decide instantly while others may take a few days or weeks. Applicants can either be accepted, rejected, or accepted with conditions. Regarding the latter, the lender will only lend if certain conditions are met, such as submitting additional pay stubs or documents related to assets or debts.

If approved, personal loans can be funded as quickly as within 24 hours, making them quite handy when cash is required immediately. They should appear as a lump sum in a checking account supplied during the initial application, as many lenders require an account to send personal loan funds via direct deposit. Some lenders can send checks or load money into prepaid debit cards. When spending the loan money, be sure to stay within legal boundaries as denoted in the contract.

Personal Loan Fees

Aside from the typical principal and interest payments made on any type of loan, for personal loans, there are several fees to take note of.

Some lenders may ask borrowers to purchase personal loan insurance policies that cover events like death, disability, or job loss. While this can be beneficial for some, such insurance is not required by law.

Personal Loan Alternatives

There are several alternatives borrowers can consider before taking out unsecured personal loans or when no reputable source is willing to lend.