Personal Loan Calculator
What determines your personal loan payment? Mainly, these three factors:
- Loan amount
- Loan term (years)
- Interest rate
This calculator shows how changing these factors affects your monthly and total cost.
Personal Loan Payment: Your Loan Amount
The first factor that determines your personal loan payment is your loan amount. Personal loan providers may offer loan amounts as low as $1,000 and as high as $100,000. The amount they are willing to offer you depends on their underwriting policies, your income, debts and credit rating.
It makes sense that the more you borrow, the higher your monthly payment. The chart below shows the payments for a 5-year personal loan with an 8% interest rate and loan amounts ranging between $1,000 and $35,000.
It seems very simple that the more you borrow, the more you pay. But interest rates are not identical for every loan amount. Here are typical offerings for highly-qualified applicants at different loan amounts from the same lender:
- $5,000 to $9,999 - 5.24% to 15.29%
- $10,000 -to $24,999 - 3.99% to 13.29%
- $25,000 to $49,999 - 4.44% to 13.29%
- $50,000 to $100,000 - 4.44% to 13.79%
That is why a personal loan payment calculator can be so helpful. You can input any combination of factors and see how it affects what you would pay for financing.
Personal Loan Payment: Your Loan Term
The next factor that drives your monthly payment is your loan term. "Loan term" is the number of years you take to repay the loan. Most personal loans are installment loans with fixed interest rates. This means you make equal monthly payments and repay the loan by the end of its term. Most personal loans allow you to prepay your loan, zeroing out your balance sooner and saving on interest charges.
The chart below shows how one, five, seven, 10 and 15 year terms impact the payment of a $10,000 loan at an 8% interest rate.
Notice that even though longer loan terms result in lower monthly payments, your total interest paid is higher - sometimes much higher. Personal finance specialists generally recommend using long-term loans only for long-term purposes. For instance, a ten-year loan for college tuition or a sizable home renovation can be a sensible choice. But you probably don't want to still be paying off your wedding loan on your tenth anniversary.
The loan term, like the loan amount, affects what lenders charge. Longer terms are riskier to lenders, and they normally charge higher rates to compensate for that extra risk. Here are typical interest rates for highly-qualified applicants at different terms from the same lender:
- 2 years: 4.44% to 13.29%
- 5 years: 4.94% to 14.49%
- 7 years: 5.39% to 14.99%
- 12 years: 6.89% to 14.99%
Be sure to check rates for the term you want when using the MoneyRates calculator.
Personal Loan Payment: Your Interest Rate
The biggest influence on your personal loan payment is likely to be your interest rate. As you have seen in the charts above, lenders apply different interest rates depending on the length and amount of the loan. But the most important factor lenders use when setting your interest rate is your credit rating. Personal loan interest rates from mainstream lenders range from under 6% to over 36%.
The chart below illustrates monthly payments for a $5,000 loan over a five-year period for interest rates ranging from 5% to 25%.
|Personal Loan Payments By Interest Rate|
|Loan Amount||Interest Rate||Term (Years)||Monthly Payment||Total Interest|
How to Get the Best Interest Rate on a Personal Loan
Of course, you want the lowest interest rate for your personal loan. And there are two ways to do that: becoming a desirable applicant and shopping aggressively.
To become the most desirable applicant, you need two things: excellent credit and a low debt-to-income ratio.
You calculate your debt-to-income ratio, or DTI, like this: first, add up your total monthly bills - the minimum payments on your credit cards, your student loan, auto loan and other loan payments, and your rent or mortgage (including property taxes and homeowners insurance). Then, divide that total by your gross (before tax) monthly income.
For example, if you pay $1,000 a month in rent, have credit card payments of $150 and a $350 auto loan payment, your total monthly bills equals $1,500. (You don't count living expenses like food or utilities.) If your gross monthly income is $6,000, your DTI is $1,500 / $6,000. That's .25 or 25%.
If you apply for a personal loan with a $500 per month payment, the lender calculates your new DTI: $2,000 / $6,000 = 33%. That's a good, low number. Lenders like to see DTIs under 38%, but some will lend at DTIs up to 50%.
To maximize your credit score, you need several things: at least three accounts with good and extensive payment history, low credit utilization, and no derogatory events like collections, judgments, foreclosures or missed payments. Credit utilization refers to the amount of credit you have (your credit limits) versus the amount you use. Consumers with the best credit scores don't utilize more than 10% of their credit, and people with good scores keep it under 30%.
If you have some blemishes on your credit history, time is your friend. Keep making on-time payments (open up a few small "second chance" accounts if necessary), and let those black marks fade away.
And check your credit report for errors - about 20% of reports contain errors that could get your loan applications denied or cause you to pay higher interest rates. Contact the credit bureaus to correct the errors and your score may improve rapidly.
How to Shop for a Personal Loan
The final tip for getting the best personal loan interest rate is to compare offers from competing lenders. Interest rates for personal loan vary widely, even for the same applicant. The more offers you get, the more confident you can be that the one you choose is fair and economical.
The easiest way to obtain several quotes fast is to simply complete the request form on MoneyRates.com. When the lenders all have the same information about you - loan amount, term, etc., they can provide quotes you can easily compare. Then choose the lender offering the best terms for your needs.