Where Can I Get a Personal Loan?
You can get a personal loan from online lenders, credit unions, and banks. If you're shopping for a personal loan, here's a quick look at your options for providers:
Online lenders: Getting a personal loan online can often result in better interest rates. 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 a personal loan.
Banks: 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.
Credit Unions: 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.
How to Calculate Payments for Your Personal Loan
To use the personal loan calculator, enter a few details about the loan:
- 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: total interest, total paid, and monthly payment. You can use them to evaluate and compare personal loans.
- 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.
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 that may not be included in the personal loan calculator results. They 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.
- 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. When you use a personal loan calculator, you will see the average and total cost of these interest payments.
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|
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?
When you use a personal loan calculator, the interest rates will be different for each loan. They will vary by state, lender, and other factors, including your:
- Credit score
- Credit history
- Debt-to-income (DTI) ratio
- Loan term
The average interest rate for a 24-month personal loan was 11.23% as of January 2023, according to Federal Reserve data. Meanwhile, the national average interest rate for a 36-month personal loan was 9.66% at credit unions and 10.40% at banks as of Q4 2022, 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 on your personal loan.
How Do You Calculate Payments on a Personal Loan?
You can calculate your monthly loan payment yourself without using an online personal loan calculator. 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 $1,000, and the loan term is 12 months. Your monthly loan payment would be $83.33 ($1,000 ÷ 12 = $83.33).
In general, your monthly payment stays the same for the entire loan term.
You can calculate the monthly interest payment by dividing the annual interest rate by the loan term in months. Then, multiply that number by the loan balance. So, for a 12-month, $1,000 loan with a 15% interest rate, your first month's interest payment would be $12.50 (1.25% x $1,000). The second month interest would be $11.53 (1.25% x $922.24) and so on.
Your 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. For example you may experience a job loss, medical emergency, or national emergency.
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. You may have a higher monthly payment 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 Common Term Lengths for a Personal Loan?
Personal loans have different term lengths, but most are two-year or five-year loans. Still, you can find personal loans with longer payback periods like for 15 years.
Why Use a Personal Loan Calculator
Investopedia's personal loan calculator can show you what your monthly payment, total interest paid, and total paid amounts might be, based on a specific loan. After calculating, 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.
- See if the monthly payment fits into your budget. If the payment is too high, try a longer loan term.
- 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
The Bottom Line
To find the best personal loan for your financial situation, shop around and compare rates, fees, and repayment terms from several lenders. And, of course, be sure to use Investopedia's personal loan calculator to estimate monthly payment and total costs.
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