Personal Loan Calculator

What this calculator is, and when to reach for it

A personal loan is the plainest kind of borrowing available: a fixed sum, a fixed rate, a fixed payment, and a date on which it ends. There is no security, no revolving limit, and no promotional period that expires. For anyone used to credit cards, that predictability is the entire appeal — you can see the finish line from the first payment.

What makes personal loans worth thinking about carefully is the origination fee. It is commonly financed, meaning it is added to the sum you sign for: you receive the amount you asked for, but you owe that amount plus the fee, and you pay interest on the whole of it for the full term. The rate quoted does not capture that, and two loans with identical rates can differ substantially once the fee is counted.

The other thing to hold in view is that "personal loan" describes a purpose rather than a product. The same structure is sold for consolidating cards, funding a renovation, covering a medical bill, or paying for a wedding, and lenders price it by your credit rather than by what you intend to do. The arithmetic on this page is identical whatever the reason.

Reach for it when you have an offer to price, when you are comparing offers whose fees differ, or when you want to know what a fixed monthly payment would need to be to clear a known amount in a chosen time.

Where a personal loan genuinely fits

It works well when it replaces something worse. Card balances at rates in the twenties swapped for a fixed loan in the low teens is a real improvement, and the fixed term means the debt ends rather than revolving indefinitely.

It works badly as a way to afford something you could not otherwise afford. Because the payment is fixed and the term is often several years, a personal loan converts a one-off decision into a long commitment, and unlike a card there is no option to pay less in a difficult month.

It also sits awkwardly against secured borrowing. The rate is higher than a mortgage precisely because the lender has no claim on an asset — which is a feature, not a defect. Paying more for borrowing that cannot cost you your home is often a sensible trade.

Where to go next

If the purpose is clearing card balances, run the alternatives first: the debt consolidation calculator compares this loan against carrying on as you are, the credit card payoff calculator shows what a fixed payment achieves with no new borrowing, and the balance transfer calculator covers promotional offers.

To weigh two offers whose rates and terms differ, use the loan comparison calculator, and the APR calculator converts a rate-plus-fees offer into the single figure that makes offers genuinely comparable.

For the same fixed-rate arithmetic applied to specific purposes, see the auto loan calculator and the student loan calculator. If the borrowing would affect a mortgage application, the debt-to-income calculator shows what the new payment does to your ratio.

How the payment and the true cost are worked out

The payment comes from the standard amortization formula. The interesting part is what happens to the fee.

principal financed = amount requested + origination fee   |   M = principal financed × [ r(1 + r)ⁿ ] ÷ [ (1 + r)ⁿ − 1 ]

amount requested

the cash you actually receive at completion

r

the monthly rate, being the annual rate divided by twelve

n

the number of monthly payments

origination fee

a percentage of the loan, commonly added to what you sign for

Why the fee makes the rate misleading

When a fee is financed, you pay interest on money you never received. Ask for 15,000 with a 5% fee and 15,000 reaches your account, but the payment is calculated on 15,750 and you repay the fee with interest across every month of the term.

The effect is to raise the true cost of the borrowing above the quoted rate, and the shorter the term the larger that effect becomes, because the fee is recovered over fewer payments. This is precisely what the APR is designed to capture, and it is why comparing personal loans on rate alone is unreliable.

The term is the biggest lever, and the most misused

Stretching a personal loan from three years to five lowers the payment noticeably and raises total interest substantially. Lenders often present the longer term first because the monthly figure looks more comfortable.

A reliable discipline is to decide the shortest term you can service without strain, then check the payment. Choosing the term by working backwards from an affordable payment tends to produce the longest loan you can bear rather than the cheapest one you can manage.

Fixed means genuinely fixed

Unlike a card, the rate does not move with the market and the payment does not fall as the balance drops. That predictability is the product’s main virtue: the total cost is knowable on day one and it does not change.

The corollary is that there is no flexibility. A card lets you pay less in a hard month; a personal loan does not, and a missed payment is a missed payment. Borrow at a level you could still service if your circumstances tightened.

What determines the rate you are offered

Credit history does most of the work, followed by income, existing debt commitments, and the term requested. Because the loan is unsecured, the lender is pricing the risk of not being repaid with nothing to fall back on, so the spread between the best and worst offers is far wider than on secured lending.

Advertised rates are typically available to a minority of applicants. Treat a headline figure as the best case and price the offer you actually receive rather than the one in the advertisement.

What this page assumes

The calculator adds any set-up fee to the loan amount, then works out a level monthly payment.

If the annual rate is zero, monthly payment equals amount financed divided by term months. Otherwise, the periodic monthly rate is annual rate divided by 12.

Worked examples, step by step

Take a 15,000 loan at 12.9% over 48 months, with a 5% origination fee deducted from the advance.

What the loan actually costs

The headline is a 12.9% loan costing 4,494.08 in interest. The honest framing is that you repay 20,244.08 in exchange for 15,000.00 of usable money, so the borrowing costs 5,244.08 in total — materially worse than the rate alone implies.

That gap of 5,244.08 against 15,000 received, over four years, is what the APR is designed to express. Two lenders both quoting 12.9%, one charging a 5% fee and one charging nothing, are offering meaningfully different loans, and only the fee-inclusive comparison reveals it.

What the fee costs once it is financed

The 750 fee does not simply cost 750. Because it is added to the principal and repaid across 48 months at 12.9%, it carries its own interest, and the payment rises from what a fee-free 15,000 loan would have required — 401.67 — to 421.75.

Over the term that difference is roughly 964, so a 750 fee genuinely costs closer to 964 by the time the loan is repaid. The longer the term, the wider that gap grows, which is why financed fees deserve more attention on a five-year loan than on a two-year one.

The vocabulary, on and around this page

Personal loan

Unsecured borrowing of a fixed sum, repaid in equal instalments over a set term at a fixed rate. No asset is pledged against it.

Unsecured borrowing

Lending with no collateral behind it. The rate is higher than secured borrowing precisely because the lender has nothing to claim.

Origination fee

A charge for arranging the loan, usually a percentage of the amount. It is commonly deducted from the advance rather than added to the balance.

Principal financed

The amount requested plus the financed origination fee. This is the figure the payment amortizes and interest is charged on.

Instalment credit

Borrowing repaid in fixed amounts over a defined term, with a known end date. The opposite of revolving credit such as a card.

Fixed rate

A rate that cannot change for the life of the loan, which makes the total cost knowable from the first payment.

Term

The number of months over which the loan is repaid. Extending it lowers the payment and raises total interest.

Amortization

The schedule by which each payment covers interest first and reduces the balance with the remainder.

APR

The rate with certain fees folded in, expressed annually. It is the only fair way to compare personal loan offers that carry different fees.

Total repayment

Every payment added together. Comparing it against the cash received is the clearest view of what borrowing costs.

Prepayment penalty

A charge for repaying early. Many personal loans have none, which makes overpaying an easy way to cut interest.

Debt to income

The share of gross income going to debt payments. A new personal loan payment counts toward it immediately.

Hard inquiry

A full credit check made when you formally apply, which causes a small temporary dip in a credit score.

Soft inquiry

A preliminary check used for pre-qualification that does not affect your score, letting you see indicative rates first.

Pre-qualification

An indicative offer based on a soft check. Useful for comparing lenders before committing to a formal application.

Advertised rate

The headline figure in marketing, typically available only to a minority of applicants with the strongest credit.

Co-signer

A second person who becomes equally liable for the debt. It can secure a better rate and puts their credit fully at risk.

Debt consolidation

Using one loan to clear several balances. The most common purpose for a personal loan, and one with its own arithmetic.

Secured loan

Borrowing backed by an asset. Cheaper than a personal loan because the lender can recover the asset if you default.

Credit utilisation

The share of revolving credit in use. A personal loan is instalment debt, so clearing cards with one usually lowers utilisation.

Common mistakes, and what this page will not do

• Assuming the fee only costs its face value. A financed 750 fee is repaid with interest over the term, raising the payment from 401.67 to 421.75 and costing roughly 964 in total.
• Comparing offers on the interest rate alone. Two loans at the same rate differ substantially if one carries a fee. Compare on APR or on total repaid against cash received.
• Letting the payment choose the term. Working backwards from an affordable monthly figure produces the longest loan you can bear rather than the cheapest one you can manage.
• Overlooking that you owe more than you received. With a financed fee you sign for 15,750 while 15,000 reaches your account, so early settlement figures will be higher than expected.
• Treating the advertised rate as your rate. Headline figures typically go to a minority of applicants. Price the offer you actually receive.
• Expecting card-like flexibility. The payment is fixed and cannot be reduced in a difficult month. Borrow at a level you could still service if things tightened.
• Consolidating cards then using them again. The loan clears the balances but the accounts stay open. Filling them again leaves you with both.
• Making a formal application to every lender. Each hard inquiry marks your file. Use pre-qualification with soft checks to compare before applying properly.
• Overlooking whether early repayment is free. Many personal loans allow overpayment without charge, which is a cheap way to cut interest. Some do not.

What this calculator leaves out: This calculator does not verify any lender’s rate or fees, model variable rates, include late fees or prepayment penalties, assess whether you would be approved, or account for tax treatment. It applies fixed-rate amortization to the amount, rate, term, and fee you enter.

Frequently asked questions