Personal Loan Calculator

The Personal Loan Calculator can give concise visuals to help determine what monthly payments and total costs will look like over the life of a personal loan. Since most personal loans come with fees and/or insurance, the end cost for them can actually be higher than advertised. 

The calculator takes all of these variables into account when determining the real annual percentage rate, or APR for the loan. Using this APR for loan comparisons is most likely to be more precise. What are Personal Loans? Personal loans are loans with fixed amounts, interest rates, and monthly payback amounts over defined periods of time.

Typical personal loans range from $5,000 to $35,000 with terms of 3 or 5 years in the U.S. They are not backed by collateral (like a car or home, for example) as is typical for secured loans. Instead, lenders use the credit score, income, debt level, and many other factors to determine whether to grant the personal loan and at what interest rate. Due to their unsecured nature, personal loans are usually packaged at relatively higher interest rates (as high as 25% or more) to reflect the higher risk the lender takes on.

Traditional Personal Loans

Before the arrival of the internet, personal loans were generally provided by banks, credit unions, and other financial institutions. They are able to profit off this system by taking in money in the form of savings accounts, checking accounts, money market accounts, or certificates of deposit (CDs), and lending the money back out at higher interest rates. Pawnshops and cash advance stores also provide personal loans at high interest rates.

Personal Loans from P2P Lenders

The advent of the internet introduced a new way of lending, shaping the landscape of the personal loan industry. Instead of borrowers going to lending institutions that provide personal loans (as is done traditionally), borrowers can now go to online financial service companies that match them up with lenders directly. The majority of these lenders are regular people with some extra money to invest. The entire process is called peer-to-peer lending, or abbreviated as P2P lending. P2P borrowers generally offer loans with more favorable terms because of the relatively low risk and low cost for the P2P service providers. P2P service providers generally operate only through a website, which is much cheaper to run than a brick-and-mortar bank or credit union. Also, P2P service providers do not lend directly, but act instead as middlemen and take a small cut of all transactions. The lenders bear the loss when borrowers default. As a result, these P2P service providers operate with very low risk.