Personal loan calculator

• The rate is annual and fixed for the whole term. It is divided by twelve to reach the monthly rate, which is how an instalment loan is quoted.
• Payments are monthly, equal, and start one month after the loan is advanced.
• An origination fee is treated as paid up front out of your own money. If your lender deducts it from the advance instead, you receive less than the amount you entered while still repaying the full figure.
• Nothing is charged for early repayment. Some agreements do charge, which changes what paying ahead is worth.
• Payment protection insurance, late fees and any charge for a returned payment are not included.
• The cost of borrowing shown here is interest plus fees in currency. It is not an annual percentage rate, which packages the same information differently.

A personal loan is the plainest form of consumer credit. You receive a lump sum, the rate is set at the start, and you repay the same amount every month until the balance reaches zero. There is no revolving limit to draw down again and no minimum payment that stretches the debt out indefinitely, which is what separates it from a credit card.

The payment comes from the annuity formula: the amount that, paid every month at the given rate, exactly clears the balance by the last instalment. Interest is charged on what you still owe, so each payment covers a slightly smaller interest bill and retires a slightly larger piece of principal than the one before it.

Term is the number to watch. Doubling the term does not halve the payment, because interest accrues for twice as long, and the total you repay climbs steeply. Running the same amount at a few different terms shows the trade quickly: what the shorter term costs you each month against what the longer term costs you overall.

A fee charged at the start does not change the payment, but it does change the price of the loan. A lender quoting a lower rate with a large origination fee can end up more expensive than one quoting a higher rate with none, and the difference is easy to miss when you are only comparing monthly figures. The cost of borrowing line adds the fee to the interest so the two offers can be read side by side.