Calculate monthly payments, total interest, and loan costs for personal loans. Compare different terms and rates to find the best financing option for your needs.
Personal loans are unsecured installment loans that provide a lump sum of money upfront, which you repay in fixed monthly payments over a predetermined period. Unlike credit cards, personal loans have fixed terms and rates, making them predictable for budgeting and financial planning.
Personal loans can be used for various purposes including debt consolidation, home improvements, major purchases, emergency expenses, or life events. Understanding how payments are calculated and the total cost helps you make informed borrowing decisions.
Where M = monthly payment, P = principal, r = monthly rate, n = number of payments
Total amount paid in interest over the life of the loan
| Loan Type | Typical Rate | Loan Amount | Term Length | Best For |
|---|---|---|---|---|
| Debt Consolidation | 6-18% | $5K-$50K | 2-7 years | High-interest debt payoff |
| Home Improvement | 6-16% | $5K-$100K | 2-7 years | Major renovations |
| Medical/Emergency | 8-20% | $1K-$50K | 2-5 years | Unexpected expenses |
| Wedding/Vacation | 8-18% | $5K-$40K | 2-5 years | Life events |
| Bad Credit | 18-36% | $1K-$25K | 2-5 years | Credit building |
| Credit Score Range | Credit Rating | Typical APR Range | Qualification |
|---|---|---|---|
| 750-850 | Excellent | 5-12% | Best rates, all lenders |
| 700-749 | Good | 8-16% | Good rates, most lenders |
| 650-699 | Fair | 12-20% | Moderate rates, many lenders |
| 600-649 | Poor | 18-25% | Higher rates, fewer options |
| Below 600 | Very Poor | 25-36% | Limited options, high rates |
| Term Length | Monthly Payment | Total Interest | Pros | Cons |
|---|---|---|---|---|
| 2 years | Higher | Lower | Quick payoff, less interest | Higher monthly burden |
| 3-4 years | Moderate | Moderate | Balanced payment/interest | Moderate total cost |
| 5-7 years | Lower | Higher | Lower monthly payment | More total interest |
| Option | Interest Rate | Terms | Approval Speed | Best For |
|---|---|---|---|---|
| Personal Loan | 6-36% | Fixed payments | 1-7 days | Predictable payments |
| Credit Card | 15-29% | Revolving credit | Instant | Flexible spending |
| HELOC | 4-8% | Variable rate | 30-45 days | Home equity access |
| 401(k) Loan | Prime + 1-2% | 5 years typical | 1-2 weeks | Low-cost borrowing |
Simplified Payments: One monthly payment instead of multiple credit card bills.
Lower Interest: Personal loan rates often lower than credit card rates.
Fixed Timeline: Clear payoff date unlike minimum credit card payments.
Credit Score Improvement: Lower credit utilization can improve your score.
Prepare documents for faster approval and better rates
Credit Score: Minimum 580-600 for most lenders, 640+ for better rates.
Income: Stable income with 2+ years employment history preferred.
Debt-to-Income: Total monthly debt payments should be under 40% of income.
Age and Residency: Must be 18+ and legal U.S. resident or citizen.
| Strategy | How It Works | Benefits | Considerations |
|---|---|---|---|
| Standard Payments | Fixed monthly amount | Predictable budgeting | Standard interest cost |
| Extra Principal | Add extra to principal | Pay off faster, save interest | Requires extra cash flow |
| Bi-weekly Payments | Half payment every 2 weeks | 13 payments per year | Cash flow adjustment needed |
| Refinancing | New loan with better terms | Lower rate or payment | May extend payoff period |
Borrowing Too Much: Only borrow what you need and can comfortably repay.
Ignoring Total Cost: Focus on APR and total cost, not just monthly payment.
Not Shopping Around: Rates can vary significantly between lenders.
Poor Timing: Apply when your credit and income are at their strongest.
Credit Union Loans: Often offer lower rates for members.
Peer-to-Peer Lending: Alternative funding source with competitive rates.
Family Loans: Borrowing from family with formal terms.
Payment Plans: Work directly with service providers for payment arrangements.