Personal Loan Calculator
Personal Loan Calculator
Estimate monthly payments, total interest and the total cost of your personal loan.
Personal Loan Results
Year-by-Year Loan Amortization
| Year | Starting Balance | Principal Paid | Interest Paid | Ending Balance |
|---|
What Is a Personal Loan?
A personal loan is a type of installment loan that allows a borrower to receive a specific amount of money and repay it over a predetermined period. Personal loans are commonly used for expenses such as debt consolidation, home improvements, major purchases, education-related costs or unexpected expenses.
Unlike some loans that are specifically tied to an asset, many personal loans are unsecured, meaning they do not require the borrower to pledge a specific asset as collateral. However, loan availability, rates, fees and requirements vary by lender and borrower.
How Does a Personal Loan Work?
With a typical fixed-rate personal loan, the borrower receives a principal amount and agrees to make regular payments over a specified term. Each payment generally contains a portion that goes toward the principal and a portion that covers interest.
At the beginning of an amortizing loan, a larger share of the payment may go toward interest because the outstanding balance is higher. As the principal decreases, the interest portion generally becomes smaller.
M = P × [r(1 + r)n] ÷ [(1 + r)n − 1]
Where:
M = Monthly payment
P = Loan principal
r = Monthly interest rate
n = Total number of monthly payments
This calculator uses the standard amortizing-loan formula to estimate the regular monthly payment when the interest rate is fixed and payments are made monthly.
What Is the Principal?
The principal is the amount borrowed from the lender. If you borrow $25,000, the initial principal is $25,000 before considering any applicable fees that may be financed or deducted.
As you make payments, part of each payment reduces the outstanding principal. The remaining balance gradually decreases until the loan is fully repaid.
What Is Personal Loan Interest?
Interest is the cost charged by a lender for allowing you to borrow money. The interest rate is normally expressed as an annual percentage.
The total amount of interest you pay depends on the loan amount, interest rate, repayment term and payment structure. A higher rate generally increases the cost of borrowing, while a longer repayment period can increase the total interest paid even when the monthly payment is lower.
How Does the Loan Term Affect Your Payment?
The loan term is the amount of time scheduled to repay the loan. A shorter term generally results in a higher monthly payment because the balance is repaid over fewer months.
However, a shorter term can reduce the total interest paid when the interest rate and other conditions are the same. A longer term usually lowers the required monthly payment but can result in more interest over the full repayment period.
How Does the Interest Rate Affect a Personal Loan?
The interest rate has a direct effect on the cost of borrowing. When the loan amount and term remain unchanged, a higher interest rate generally leads to a higher monthly payment and greater total interest.
The rate offered by a lender can depend on factors such as credit history, income, debt obligations, loan amount, repayment term and the lender's underwriting criteria.
What Is an Origination Fee?
An origination fee is a fee some lenders charge for processing and originating a loan. It may be expressed as a percentage of the amount borrowed.
For example, a 2% origination fee on a $25,000 loan would equal $500. Depending on the lender, the fee may be deducted from the loan proceeds or incorporated into the loan balance.
This calculator displays the estimated origination fee separately. It does not automatically add the fee to the financed loan balance because lender practices differ.
What Is an Extra Monthly Payment?
An extra monthly payment is an additional amount paid toward the loan beyond the scheduled payment. Making additional payments can reduce the outstanding principal faster and may reduce the total interest paid, depending on the loan's terms and whether the lender applies the extra amount directly to principal.
The extra-payment option in this calculator assumes the additional amount is applied toward the loan balance each month and that there is no prepayment penalty.
Personal Loan vs. Credit Card
Personal loans and credit cards are both forms of borrowing, but their structures are different. A personal loan generally provides a fixed amount with a scheduled repayment period, while a credit card is typically a revolving line of credit.
A personal loan may provide predictable monthly payments when it has a fixed rate. Credit cards can have variable rates and minimum payments that change as the balance changes.
Personal Loan vs. Secured Loan
Many personal loans are unsecured, meaning they do not require a specific asset as collateral. Secured loans are backed by an asset, such as a vehicle or property.
Because lending requirements differ, borrowers should compare the interest rate, fees, repayment period and consequences of missed payments before choosing a loan.
How to Use This Personal Loan Calculator
Enter the amount you want to borrow, the annual interest rate and the desired loan term. If your lender charges an origination fee, enter the fee percentage in the optional field.
You can also enter an additional monthly payment to see how paying more than the required amount could affect the estimated payoff time and interest cost.
Click Calculate Personal Loan to view your estimated monthly payment, total interest, total repayment and year-by-year amortization.
Ways to Reduce Personal Loan Costs
- Compare interest rates: Even small differences in rates can affect total borrowing costs.
- Compare fees: Look beyond the advertised interest rate and check origination and other applicable fees.
- Choose a suitable term: A shorter term can reduce total interest but usually increases the monthly payment.
- Make additional payments when appropriate: Extra principal payments may reduce interest and shorten the repayment period.
- Borrow only what you need: A smaller loan amount generally means less interest over time.
Important Personal Loan Disclaimer
The results produced by this calculator are estimates based on the information entered and the standard amortizing-loan formula. Actual loan payments and costs can vary depending on the lender, loan agreement, fees, taxes, payment dates, interest calculations and other terms.
This calculator does not provide a loan offer, approval or financial advice. Always review the official loan agreement and lender disclosures before accepting a personal loan.
Frequently Asked Questions About Personal Loans
What is a personal loan calculator?
A personal loan calculator is a tool that estimates monthly payments, total interest and total repayment based on the loan amount, interest rate and repayment term.
How is a personal loan monthly payment calculated?
For a typical fixed-rate amortizing loan, the monthly payment is calculated using the loan principal, monthly interest rate and total number of monthly payments.
Does a longer loan term reduce the monthly payment?
Generally, yes. Spreading the loan across more monthly payments can reduce the required monthly payment, but it can also increase the total interest paid over the life of the loan.
Does paying extra reduce loan interest?
It can. If extra payments are applied toward the outstanding principal, the balance can be reduced faster, potentially lowering future interest and shortening the repayment period.
What is an origination fee?
An origination fee is a charge that some lenders apply for processing and originating a personal loan. It is often calculated as a percentage of the loan amount.
Is a personal loan always unsecured?
No. Many personal loans are unsecured, but secured personal loan products also exist. The lender determines the collateral requirements and loan terms.
Can I use this calculator for debt consolidation?
Yes. You can use the calculator to estimate the payment and interest cost of a potential consolidation loan. When comparing options, also consider fees, existing debts, repayment terms and the total cost of borrowing.
Are the results from this calculator guaranteed?
No. The results are estimates based on the information entered. Actual loan offers, payments and costs depend on the lender and the final terms of the loan agreement.
Final Thoughts
A personal loan can provide access to a fixed amount of money with a structured repayment schedule, but the total cost depends on more than just the amount borrowed. Interest rates, loan terms, fees and repayment behavior can all affect the final cost.
The Money Master Blog Personal Loan Calculator makes it easier to estimate monthly payments and compare different borrowing scenarios. Try different loan amounts, interest rates, terms and extra payments to understand how each factor can change the overall cost of the loan.
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