Know the real cost before you borrow
Whether it is for a car, a home renovation or consolidating card debt, a personal loan is more than its advertised monthly payment. This calculator shows the monthly payment, the total interest, the origination fee and how much cash you actually receive, then checks your debt-to-income ratio. Change the term to find the balance between an affordable payment and a reasonable total cost.
How the payment is calculated
Personal loans are fully amortized with equal monthly payments:
Payment = A × r ÷ (1 − (1 + r)^−n)
- A: loan amount;
- r: annual interest rate ÷ 12;
- n: number of monthly payments.
Many lenders deduct an origination fee from the funds they disburse. You still repay the full loan amount, so the fee is part of your cost of borrowing even though it never appears in the monthly payment.
Worked example: $15,000 over 48 months
You borrow $15,000 at 12% for 4 years with a 3% origination fee. Your gross monthly income is $6,000 and you already pay $800 a month on other debts.
- Monthly rate: 12% ÷ 12 = 1%.
- Payment: 15,000 × 0.01 ÷ (1 − 1.01⁻⁴⁸) ≈ $395.01.
- Total interest: 395.01 × 48 − 15,000 ≈ $3,960.
- Origination fee: 3% × 15,000 = $450, so you receive $14,550.
- Total cost of borrowing: $4,410.
- Debt-to-income: (395.01 + 800) ÷ 6,000 ≈ 19.9%.
How the term changes the cost
| Term | Monthly payment | Total interest | Total cost with fee |
|---|---|---|---|
| 12 months | $1,332.73 | $993 | $1,443 |
| 24 months | $706.10 | $1,946 | $2,396 |
| 36 months | $498.21 | $2,936 | $3,386 |
| 48 months | $395.01 | $3,960 | $4,410 |
| 60 months | $333.67 | $5,020 | $5,470 |
| 84 months | $264.79 | $7,242 | $7,692 |
Stretching the loan from 3 to 7 years cuts the payment almost in half but more than doubles the cost.
What lenders look at
- Credit score: it drives the rate more than anything else. Checking your rate with a soft credit pull does not affect your score.
- Debt-to-income ratio: most lenders prefer a total DTI under 36%, and many decline above 43%.
- APR: US lenders must disclose it under the Truth in Lending Act; in the UK it is shown as the representative APR. Compare APRs, not headline rates.
Tips before you sign
Compare at least three offers for the same term, watch out for prepayment penalties, and avoid using a personal loan for everyday spending. If you need an exact amount in hand, divide it by (1 − fee rate) to know how much to borrow. Paying a little extra each month shortens the loan and saves interest when the lender allows penalty-free prepayment.