Your monthly payment for a personal loan depends on the amount, term, and interest rate of the loan. Use a personal loan calculator to get a sense of what your monthly payment and total interest could end up being for the amount you want to borrow.
Personal Loan Calculator Results Explained
To use the personal loan calculator, enter a few details about the loan, including the:
- 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, which you can use to evaluate and compare various loans. Here's what the numbers mean:
- 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.
Aim for the shortest possible loan term that has payments you can still afford.
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|
In addition to interest, your lender may charge personal loan fees, which 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 than anticipated. Plan accordingly.
- 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.
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|
You can calculate the monthly interest payment yourself if you prefer—or if you're just interested in seeing the math. Here's how:
- Calculate the monthly interest rate. Divide the annual interest rate by the loan term in months. Using the loan details above, divide 15 (the interest rate) by 12 (the loan term in months) to get 1.25%.
- Calculate the monthly interest payment. Multiply the result from step 1 by the loan balance. So, your first month's interest payment would be 1.25% x $1,000, or $12.50. The second month would be 1.25% x $922.24, or $11.53, and so on.
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?
Interest rates vary by state, lender, and a variety of other factors, including your:
So, what's the average interest rate for a personal loan? That's not easy to pin down because there are so many factors involved. Broadly speaking, however, we can break down the average interest rate by loan term and credit score.
The average interest rate for a 24-month personal loan was 9.34% as of August 2020, according to the most recent data from the Federal Reserve. Meanwhile, the national average interest rate for a 36-month personal loan was 9.21% at credit unions and 10.28% at banks as of June 2020 (the most recent data available), according to the National Credit Union Administration.
Interest rates for personal loans vary considerably depending on your credit score. In general, the higher your credit score, the lower your interest rate will be. Here are the average upper limit interest rates you might expect, based on different credit scores:
|Credit Score||Average Interest Rate|
|Excellent (720 – 850)||12.5%|
|Good (690 – 719)||15.5%|
|Average (630 – 689)||19.9%|
|Poor (300 – 629)||32.0%|
If you have an excellent credit score, you may qualify for a 0% balance transfer credit card, which could be a cheaper option than a personal loan.
How Do You Calculate Payments on a Personal Loan?
If you want to calculate your monthly loan payment yourself, 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 $2,400, and the loan term is 24 months. Your monthly loan payment would be $100 ($2,400 ÷ 24 = $100).
In general, your monthly payment stays the same for the entire loan term. However, the 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—due to a job loss, medical emergency, or national emergency (COVID-19, for example).
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—which means either a higher monthly payment moving forward or a longer loan term (or both). If you’re getting a deferment, clarify the terms with the lender before you agree to it.
What Are the Most Common Term Lengths for a Personal Loan?
Personal loans come in various term lengths, but most are between two and five years. Still, you can find personal loans with longer payback periods—as high as 15 years.
With a longer-term loan, however, keep in mind that your rates could be higher, and you will end up paying more interest overall than you would with a shorter-term loan. Moreover, a long-term personal loan also means having a prolonged debt burden, plus more opportunities to make late payments, which could damage your credit.
How to Use a Personal Loan Calculator
Our loan calculator shows what your monthly payment, total interest paid, and total paid amounts might be, based on inputs you provide. That information is helpful for a few reasons:
- 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.
- You can see if the monthly payment fits into your budget. If the payment is too high, try a longer loan term.
- You can 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
Where Can I Get a Personal Loan?
In general, you have three choices for where to get a personal loan: Online lenders, credit unions, and banks. Here's a quick look at each option:
Not surprisingly, the online personal loan market is extremely competitive. For borrowers, that can be a good thing: To attract customers, 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 your money.
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.
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.
The Bottom Line
To find the best personal loan for your financial situation, be sure to shop around and compare rates, fees, and repayment terms from several lenders. And, of course, be sure to use our loan calculator to test out different options to find a scenario that fits your goals and budget.—Jean Folger
Experian. "Understanding Loan Origination Fees." Accessed Oct. 14, 2020.