Personal loan calculator

Work out the monthly payment and the total interest on a personal loan — then turn the interest rate the lender quotes into the APR you actually pay once the origination fee is priced in.

How the math works

A personal loan is a plain fixed-rate amortizing loan. The payment is the level monthly amount that clears the balance to zero over the term, with each payment split between interest on the balance and principal.

Where M is the monthly payment, P is the amount borrowed, i is the monthly rate (the interest rate divided by 12), and n is the number of months. Total interest is every payment added up, minus the amount borrowed.

The interest rate is only half the price. Most personal loans carry an origination fee — commonly 1% to 8% of the amount — and it is usually taken out of the money the lender sends you. Sign for $10,000 at a 5% fee and $9,500 lands in your account, but the payment is still figured on the full $10,000. You pay the rate on money you never touched. That is what the APR captures, and why federal Truth in Lending rules make the lender disclose it. The APR is the monthly rate that makes the cash you actually received equal the present value of the payments:

There is no clean algebra for j; the calculator solves it by search. With no fee, the APR and the interest rate are the same number. Add a fee and the APR climbs above the rate. The gap is the fee, expressed as a rate.

Worked example

Take a borrower consolidating $10,000 of debt into a three-year personal loan at the Federal Reserve's G.19 average personal loan rate of 11.40%, with a 5% origination fee.

The payment comes to $329.28 a month. Over 36 months that is $11,854.25 paid in, of which $1,854.25 is interest at the note rate. So far, so ordinary — that is the number every calculator shows.

Now the fee. Five percent of $10,000 is $500, skimmed off the top, so only $9,500 reaches the account. Measure the same $11,854.25 in payments against the $9,500 actually received and the true APR is 14.99% — not the 11.40% on the rate sheet. The fee added 3.59 points of APR without touching the quoted rate.

One more number the payment field hides: if you needed the full $10,000 in hand, borrowing $10,000 won't do it. To net $10,000 after a 5% fee you have to sign for $10,526.32 — divide the cash you need by 0.95. The fee is charged on the bigger number.

When this calculator is wrong

The payment is the easy part, and every tool on the first page of results gets it right. Where they go quiet is on the parts that decide whether the loan is a good deal.

• It assumes the rate is the whole price. The bank and credit-union calculators ask for the amount, the rate, and the term, and stop there — no field for the origination fee, so the payment they show is real but the cost they imply is understated. On the example above, the fee turns an 11.40% rate into a 14.99% APR. The second mode above prices that gap. When you compare loan offers, compare APRs, not rates: a lower rate with a bigger fee can be the more expensive loan.
• It assumes you receive what you borrow. When the fee comes out of the proceeds, the cash in your account is smaller than the loan on the contract, so a loan sized to your quoted number leaves you short. The gross-up — divide the cash you need by one minus the fee — is the fix, and no mainstream calculator does it for you.
• It says nothing about what the loan is for. The most common reason to take a personal loan is to clear a credit card, and the loan only helps if two things hold: the fee-inclusive APR beats the card's rate, and the card doesn't fill back up. The U.S. average credit card APR is 22.76%, so a 14.99% personal loan is a genuine improvement — right up until the paid-off card gets used again and the borrower is carrying both. The math consolidates the debt; it doesn't consolidate the habit.
• It assumes the loan runs full term. Pay a personal loan off early and you skip the remaining interest, which the total-interest figure never reflects. A few lenders also charge a prepayment penalty that claws some of that back. Check for one before you count on paying ahead.

What to do with the result

Get the APR, in writing, from every lender you're considering — not the rate, the APR — and line them up. That single number already folds in the origination fee, so it is the only fair way to rank offers. Federal law requires the lender to disclose it, so it costs you nothing but the question.

If the loan is meant to retire a credit card balance, run both numbers side by side. Paying the minimum on a card at 22.76% is close to the most expensive thing a household can do with its money, and a fixed-term personal loan at a lower APR is a legitimate way out of it. The catch is behavioral, not mathematical: the loan works only if the freed-up card stays unused. If it won't, the APR you saved is borrowed right back.

Common questions

What's the difference between the interest rate and the APR on a personal loan?

The interest rate is what the balance accrues at. The APR is that rate plus the origination fee and any other required charges, expressed as one annual number. When there's no fee they match. When there is a fee taken out of the proceeds, the APR is higher, because you pay the rate on money the fee kept you from receiving. On the $10,000 example, an 11.40% rate with a 5% fee is a 14.99% APR.

How much do personal loans actually cost right now?

The Federal Reserve's G.19 average interest rate on a 24-month personal loan at commercial banks was 11.40% at the most recent reading. That's the note rate before fees; your rate moves with your credit, and the origination fee — commonly 1% to 8% — sits on top of it in the APR.

Is the origination fee added to my loan or taken out of it?

Usually taken out. Most lenders deduct the fee from the amount they send you, so signing for $10,000 at a 5% fee nets you $9,500. Some roll it into the balance instead, which means you borrow — and pay interest on — a larger amount. Either way it shows up in the APR. To receive a specific amount in cash, divide it by one minus the fee.

Should I use a personal loan to pay off credit card debt?

Often yes, on the math: a personal loan at a 14.99% APR is a real improvement over the 22.76% U.S. average card APR, and the fixed term forces a payoff date the card never sets. The risk is running the card back up while you still owe the loan. The loan fixes the rate; it doesn't fix the spending.

Can I pay a personal loan off early to save interest?

Usually. Personal loans amortize like any fixed-rate loan, so paying ahead skips the interest on the balance you retire early. Confirm there's no prepayment penalty first — most lenders don't charge one, but a few do, and it can offset part of the saving.