The fee that changes the deal
Lenders advertise the interest rate. What they rarely put in the headline is the origination fee — a one-time cut, typically 1% to 8%, taken out of the money before it reaches you.
Borrow $15,000 at 11.5% with a 3% fee and the arithmetic gets uncomfortable: $450 disappears immediately, you receive $14,550, and you pay interest on the full $15,000 anyway. Your true cost isn't 11.5% — it's closer to 13.7%. That's the number this calculator solves for, and it's the only fair way to compare two offers.
How the true APR is found
Where personal loans make sense — and where they don't
- Good use: consolidating credit card debt at a genuinely lower APR. Going from 23% to 12% is real money, provided you stop using the cards.
- Good use: a necessary one-off expense with a clear payoff plan — an urgent repair, a medical bill.
- Bad use: funding a lifestyle expense. A holiday financed at 12% for four years is remembered long after it's forgotten.
- Bad use: borrowing to invest. You're guaranteed to pay the interest; you're not guaranteed the return.
Shop the APR, not the payment. Lenders compete on the monthly figure because a longer term always makes it look smaller. Two loans with the same payment can differ by thousands in total cost. Compare APR and total repaid — both are on this page.
Before you apply
- Check your credit report first. Errors are common and a single fixed mistake can move your rate meaningfully.
- Get pre-qualified offers — most lenders use a soft credit check that doesn't affect your score, so you can compare several.
- Try a credit union. They routinely undercut banks and online lenders on personal loans.
- Read for prepayment penalties so early payoff stays an option.
If you're consolidating card debt, run the numbers both ways first: the credit card payoff calculator shows what simply paying more each month would achieve, and the debt payoff planner compares tackling several balances at once. Sometimes a plan beats a new loan.
Frequently asked questions
How is a loan payment calculated?
Using the amortizing loan formula: M = P × [r(1+r)^n] ÷ [(1+r)^n − 1], where P is the amount borrowed, r is the monthly interest rate and n is the number of monthly payments. Each payment covers that month's interest first, and whatever is left reduces the balance.
What is an origination fee?
A one-time charge, usually 1–8% of the loan, that many lenders deduct from the money they send you. Borrow $15,000 with a 3% fee and you receive $14,550 — but you pay interest on the full $15,000. It quietly raises your true borrowing cost.
What is the difference between interest rate and APR?
The interest rate is the cost of borrowing the principal. APR includes required fees as well, so it reflects what the loan actually costs. When comparing offers, compare APRs — a lower rate with a big fee can be worse than a higher rate with none.
Does a longer loan term save money?
No — it lowers the monthly payment but increases total interest, because you are borrowing for longer. Switch between the term buttons above and watch the total interest line move while the monthly payment falls.
Can I pay a personal loan off early?
Usually yes, and it saves interest because charges accrue on the outstanding balance. Check for prepayment penalties before signing — they are uncommon on personal loans in the US but not extinct. If there is none, extra payments go entirely to principal.