In addition to interest, your lender may charge personal loan fees that may not be included in the personal loan calculator results. They might include:
Your monthly payment stays the same for the life of the loan. However, the amounts that go toward interest and principal change. That's because, with amortized loans, the interest portion of the monthly payment depends on how much you still owe.
When you first get a loan, the interest payments are larger because the balance is larger. As your balance gets smaller, the interest payments get smaller—and more of your payment goes toward paying off the loan.When you use a personal loan calculator, you will see the average and total cost of these interest payments.
Here's a sample amortization schedule for a 12-month, $1,000 loan with a 15% interest rate:
| Payment Month | Total Monthly Payment | Principal Payment | Interest Payment | Total Interest | Remaining Balance |
|---|---|---|---|---|---|
| 1 | $90.26 | $77.76 | $12.50 | $12.50 | $922.24 |
| 2 | $90.26 | $78.73 | $11.53 | $24.03 | $843.51 |
| 3 | $90.26 | $79.71 | $10.54 | $34.57 | $763.80 |
| 4 | $90.26 | $80.71 | $9.55 | $44.12 | $683.09 |
| 5 | $90.26 | $81.72 | $8.54 | $52.66 | $601.37 |
| 6 | $90.26 | $82.74 | $7.52 | $60.18 | $518.63 |
| 7 | $90.26 | $83.78 | $6.48 | $66.66 | $434.85 |
| 8 | $90.26 | $84.82 | $5.44 | $72.09 | $350.03 |
| 9 | $90.26 | $85.88 | $4.38 | $76.47 | $264.14 |
| 10 | $90.26 | $86.96 | $3.30 | $79.77 | $177.19 |
| 11 | $90.26 | $88.04 | $2.21 | $81.99 | $89.14 |
| 12 | $90.26 | $89.14 | $1.11 | $83.10 | $0.00 |
An easy way to multiply by a percentage is to multiply the two numbers (for example, $1,000 x 1.25) and then divide by 100. So, $1,000 x 1.25 = $1,250; then $1,250 ÷ 100 = $12.50.
What Is the Average Interest Rate on a Personal Loan?
When you use a personal loan calculator, the interest rates will be different for each loan. They will vary by state, lender, and other factors, including your:
- Credit score
- Credit history
- Income
- Debt-to-income (DTI) ratio
- Loan term
The average interest rate for a 24-month personal loan was 10.32% as of June 2023, according to Federal Reserve data. Meanwhile, the national average interest rate for a 36-month personal loan was 10.02% at credit unions and 10.75% at banks as of Q1 2023, according to the National Credit Union Administration.
Interest rates for personal loans vary considerably depending on your credit score. In general, the higher your credit score, the lower your interest rate on your personal loan.
How Do You Calculate Payments on a Personal Loan?
You can calculate your monthly loan payment yourself without using an online personal loan calculator. Divide the total amount you'll pay (including the principal and interest) by the loan term (in months). For example, say the total amount you'll pay is $1,000, and the loan term is 12 months. Your monthly loan payment would be $83.33 ($1,000 ÷ 12 = $83.33).
In general, your monthly payment stays the same for the entire loan term.
You can calculate the monthly interest payment by dividing the annual interest rate by the loan term in months. Then, multiply that number by the loan balance. So, for a 12-month, $1,000 loan with a 15% interest rate, your first month's interest payment would be $12.50 (1.25% x $1,000). The second month's interest would be $11.53 (1.25% x $922.24), and so on.
Your payment may change if you ask your lender for a deferment. A deferment allows you to take a scheduled break from payments if you have a financial hardship. For example, you may experience a job loss, medical emergency, or national emergency.
Keep in mind that the interest may continue to accrue during the deferment period. If it does, you'll have a higher total amount to pay off. You may have a higher monthly payment or a longer loan term (or both). If you’re getting a deferment, clarify the terms with the lender before you agree to it.
Why Use a Personal Loan Calculator
Investopedia's personal loan calculator can show you what your monthly payment, total interest paid, and total paid amounts might be, based on a specific loan. After calculating, you can:
- Try different scenarios before you commit to a loan. Be sure to try different loan-term lengths to see how that affects your monthly payment and total interest.
- See if the monthly payment fits into your budget. If the payment is too high, try a longer loan term.
- Decide if you're willing to pay the total amount of interest in exchange for the loan. If it's too high, try a shorter loan term.
If changing the loan term length doesn't get you the loan you want, you may be able to lower your loan costs if you:
- Borrow less money
- Shop around with different lenders
- Improve your credit score before you apply for a loan
What Are Common Term Lengths for a Personal Loan?
Personal loans have different term lengths, but most are two-year or five-year loans. Still, you can find personal loans with longer payback periods, like 15 years.
Who Has the Best Rates on Personal Loans?
The best rates on personal loans are often found with online lenders. Credit unions typically offer the next most affordable rates, with traditional banks being the most expensive. The interest rate is highly dependent on your credit history, however. You'll likely find a fair rate from any of these sources if you have good credit. If you have bad credit, you may find it more difficult to get a loan from a bank or credit union.
Are there Penalties if I Pay Off My Loan Early?
Some loans may incur a penalty charge if you pay off your personal loan early since that deprives them of earning the total interest. Read the fine print on your loan agreement and ask your loan officer if there are any early payment penalties before you sign your loan documents.
The Bottom Line
To find the best personal loan for your financial situation, shop around and compare rates, fees, and repayment terms from several lenders. And, of course, be sure to use Investopedia's personal loan calculator to estimate monthly payment and total costs.
