Personal Loan Calculator

• Monthly payment, total interest and total repaid from the amount, rate and term.
• Origination fees handled properly — deducted from proceeds or financed, whichever your lender does.
• The effective annual cost including the fee, solved from the actual cash flows.
• A term comparison table showing the payment-versus-total-cost trade-off.

How a personal loan is priced

A personal loan is a fixed-rate instalment loan: you borrow a lump sum and repay it in equal monthly payments over a set term. There is no revolving balance and no minimum-payment trap, which is a real advantage over a credit card.

The payment comes from the same annuity formula that governs a mortgage:

M = P × [ i(1 + i)^n ] / [ (1 + i)^n − 1 ]

M = monthly payment
P = amount financed
i = annual rate ÷ 12
n = number of monthly payments

On $15,000 at 12.5% over five years, that is $337.51 a month, $5,251 of total interest, and $20,251 repaid.

Most personal loans are unsecured, meaning nothing is pledged as collateral. That is why the rates sit well above mortgage and auto rates: the lender's only recourse if you stop paying is your credit file and, ultimately, the courts.

Why an origination fee changes the rate

Many personal lenders charge an origination fee of 1% to 8%, and most deduct it from the money they send you. You sign for $15,000 at 12.5%, $750 is withheld as a 5% fee, and $14,250 arrives in your account. But your payments are calculated on the full $15,000.

You are therefore paying $337.51 a month for sixty months in exchange for $14,250 of cash. That is not a 12.5% loan. Solving for the rate that reconciles the actual cash received with the actual payments made gives roughly 14.6%.

Solve for r:

  cash received = Σ  payment / (1 + r/12)^t     for t = 1 to n

The r that balances this equation is the true cost of the borrowing.

This calculator solves that equation using a bisection method, which is why it can report an effective rate rather than just repeating the quoted one. Enter the origination fee under Advanced and the figure appears in your results.

This is precisely what the APR disclosure is meant to capture, and it is why comparing offers by APR rather than by interest rate is the right approach. Lenders that advertise a low interest rate alongside a high origination fee are relying on people comparing the wrong number.

The term trade-off

Extending the term lowers the payment and raises the total cost. Both effects are large.

Going from two years to seven roughly halves the payment and more than triples the interest. Lenders often present the longest term first, because the monthly figure looks most comfortable.

A useful discipline: choose the shortest term whose payment you could still meet if your income dropped. Then, if you want more room, pay extra voluntarily rather than committing to a longer term — you get the low required payment as a safety net and the short effective term when things go well.

Using a personal loan to consolidate credit card debt

This is the most common use, and it can work well. Converting 24% revolving debt into a 12% instalment loan with a fixed end date lowers the rate and imposes a schedule. Two conditions have to hold.

The total cost has to actually be lower. Compare total cost against total cost, including the origination fee, not rate against rate. A 12% loan with a 6% fee over seven years can easily cost more than clearing the cards in three years at 24%. Run both — this calculator and the Credit Card Payoff calculator — and compare the total repaid figures.

The cards have to stay at zero. This is where consolidation most often fails. The loan clears the balances, the credit lines sit empty and available, and within a year there are new card balances alongside the loan. The household now has more debt than before at a higher blended rate. If you know this is a risk, closing the cards — accepting the credit-score effect — may be the safer choice.

Before you borrow: the alternatives worth checking

• A credit union. Frequently the lowest rates available on unsecured personal loans, often with no origination fee. Membership is usually easy to obtain.
• A 0% balance transfer, if the debt is on cards and you can clear it inside the promotional window. Cheaper than any personal loan when it works.
• A home equity loan or line, if you own a home. Much lower rates, because the debt is secured — but that security is your house, and converting unsecured debt into secured debt raises the stakes of not paying considerably.
• A 401(k) loan. Low rate and you pay interest to yourself, but the money is out of the market while borrowed, and if you leave your job the balance may become due quickly or be treated as a distribution. Genuinely a last resort rather than a clever trick.
• Not borrowing. For a discretionary purchase, the honest comparison is between borrowing now and saving for a few months. The Compound Interest calculator shows what the interest saved would be worth if invested instead.

What to avoid entirely: payday and title lending, where effective annual rates commonly run into the hundreds of percent, and where the structure is designed around rollover rather than repayment.

Common mistakes

Comparing interest rates instead of APRs. The APR includes the origination fee. The interest rate does not. Two loans quoted at the same rate can differ by two full percentage points of real cost.

Borrowing the full amount offered. Lenders frequently approve more than you asked for. Borrow what you need.

Accepting the longest term because the payment looks affordable. Covered above. The monthly figure is the number lenders lead with precisely because it hides the total.

Not checking for a prepayment penalty. Most reputable personal lenders charge none, but confirm it before assuming you can pay early without cost. The calculator lets you model one if yours has one.

Applying to many lenders at once without checking for pre-qualification. Most lenders offer a soft-pull pre-qualification that shows your likely rate without affecting your credit score. Use those to shortlist, then submit a formal application only to the one you choose.

Frequently asked questions