💳 Loan Calculator
Estimate monthly repayments, total interest fees, and loan payoff schedules.
What a loan costs, and how to compare two offers honestly
A fixed-rate loan has three inputs and one output. You choose how much you borrow, the lender sets the rate, you agree a term, and the monthly payment follows from those three by formula. There is no negotiation in the arithmetic, which makes loans one of the few financial products you can fully understand in five minutes.
What people get wrong is not the payment. It is the total. A $20,000 loan at 9% over three years costs $2,897 in interest; the same loan stretched to seven years costs $7,087. The monthly payment falls from $636 to $322, which feels like a better deal and is in fact two and a half times more expensive.
Payment versus total cost
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 2 years | $914 | $1,931 | $21,931 |
| 3 years | $636 | $2,897 | $22,897 |
| 5 years | $415 | $4,910 | $24,910 |
| 7 years | $322 | $7,087 | $27,087 |
Every extra year of term buys a lower payment and sells you more interest. The right term is the shortest one whose payment you can make reliably, with a little room left over. Choosing a term by what you can just barely afford leaves no margin for a bad month.
Rate, APR and the fees that hide between them
The interest rate prices the money. The APR adds origination fees, administration charges and anything else the lender bundles into the cost of credit, expressed as an annual percentage. Two loans at 8.9% are not comparable if one has a 3% arrangement fee and the other has none.
On a $20,000 three-year loan, a 3% origination fee is $600. Deducted up front, it raises the effective APR from 8.9% to about 11.2%. Always compare APR to APR, and if a lender will only quote a rate, ask what the APR is in writing.
Secured versus unsecured
A secured loan is backed by an asset the lender can take if you default: a car, a property, a deposit. That lowers the lender's risk and therefore your rate, often by three to eight percentage points. It also means a missed payment can cost you the asset. An unsecured personal loan is priced on your credit record alone, so the rate is higher and the consequence of default is damage to your credit file and collection action rather than repossession.
What drives the rate you are offered
- Credit score. The single biggest factor for unsecured borrowing. The gap between an excellent and a fair score is routinely ten percentage points or more.
- Debt-to-income ratio. Total monthly debt payments divided by gross monthly income. Above roughly 40%, approval gets difficult and pricing gets worse.
- Term. Longer terms usually carry slightly higher rates as well as more total interest, because the lender is exposed for longer.
- Amount. Very small loans often carry higher rates to cover fixed administration costs.
A worked example
You want to consolidate $14,000 of credit card debt sitting at 22%. A personal loan at 11% over four years gives a payment of $361.83 and total interest of $3,368. Carrying the same $14,000 on the cards while paying $361.83 a month would take five years and three months and cost $8,795 in interest. The consolidation saves about $5,400, but only if you stop using the cards. If the balances rebuild, you have simply added a loan.
Consolidation only works as debt reduction if the old accounts are closed or left untouched. Otherwise it converts one debt into two.
Early repayment
Most personal loans let you overpay without penalty, and because interest accrues on the balance, every overpayment is worth more than its face value. On the $20,000 five-year loan above, adding $50 a month ends the loan eight months early and saves $628. Check the agreement for early repayment charges first; some lenders charge one or two months' interest.
Frequently Asked Questions (FAQs)
What is a good interest rate on a personal loan?
It depends almost entirely on your credit profile. With excellent credit, single digits are achievable. With fair credit, mid to high teens is normal. Anything above about 30% is close to credit card territory and worth questioning. Always compare against what your existing cards charge before borrowing to consolidate.
Does applying for a loan hurt my credit score?
A formal application leaves a hard search, which typically costs a few points for a few months. Most lenders offer a pre-qualification that uses a soft search and does not affect the score, so shop with those first and only submit a full application to the lender you pick. Multiple hard searches within a short window are usually treated as one for rate shopping.
Can I pay a loan off early?
Usually yes. Check whether the agreement uses simple interest, where early repayment always saves money, or has an early repayment charge. Also confirm that overpayments reduce the principal rather than being held against future instalments.
What happens if I miss a payment?
Expect a late fee, interest to continue accruing, and a mark on your credit file once the payment is about thirty days overdue. Contact the lender before the payment is due rather than after; most have hardship arrangements that are far cheaper than default.
Should I borrow more than I need since I am applying anyway?
No. You pay interest on every dollar for the whole term. Borrowing an extra $3,000 on a 9% five-year loan costs $737 in interest for money you did not need. Borrow the amount, not the approval limit.
How is a loan different from a credit card?
A loan has a fixed amount, a fixed rate and an end date, so the debt is guaranteed to clear. A credit card is revolving, the rate is usually higher and variable, and the minimum payment is a percentage of the balance, which means the debt can persist indefinitely.
Does the calculator show the total cost including fees?
It calculates interest on the amount you enter. If the lender deducts an origination fee from the advance, enter the full amount borrowed rather than the amount you receive, and compare offers on APR rather than on the headline rate.