Personal Loan Calculator — Estimate Your Monthly Payments

Factors That Affect Your Monthly Payment

Loan amount

When you’re considering a personal loan, you want to borrow as much as you need -- no more, no less.

  • If your loan amount is too small, you may not have enough funds to cover the purpose of the loan.
  • If you borrow more than you need, you’ll end up paying more interest than necessary, while also having to fight the temptation to spend the surplus on things you don’t need.

Each personal loan lender has its own borrowing minimums and maximums. They can range from $1,000 to $100,000.

For borrowers seeking bigger personal loans, that financial need may sway their choice of lenders because certain lenders won’t allow them to borrow in such large amounts.

Note: Some lenders may offer personal loans that exceed their advertised borrowing maximums, but they’ll often review such applications on a case-by-case basis to determine if such loans will be approved. (Usually, these requests are reserved for those with excellent credit and high incomes.)

On the other hand, some lenders have higher minimum borrowing amounts, which means people searching for a small personal loan will turn to another lender to avoid overborrowing.

Not surprisingly, the more that you borrow, the higher your monthly payment. However, your repayment term does play a major role in that monthly cost.

Repayment term

As with loan amounts, lenders can have offer different repayment terms to customers.

The most common repayment terms are 3 years and 5 years. However, they can range from 6 months to 7+ years.

If you choose a longer repayment term, your monthly payments will be lower but you’ll end up paying more interest over the life of the loan.

If you choose a shorter repayment term, your monthly payments will be higher but you’ll pay less total interest.

Lenders may change the repayments terms available for a particular loan based on the desired loan amount. Generally, for larger personal loans, you may have to choose a longer repayment term.

Before you pick a repayment term, determine how much you can afford every month.

Using the personal loan calculator, you can tweak the repayment term to find out the term length with the monthly payment amount that best fits your finances.

Tip: If you pick a lender that doesn’t charge prepayment penalties, you can make more or larger monthly payments to help pay off your personal loan faster without any additional cost.

Interest rate

Rightfully so, the interest rate on your personal loan is significant as it will be responsible for the bulk of the cost to borrow funds.

Lenders will have range of interest rates offered to loan applicants -- again, the ranges vary by lender.

For example:

  • Lender A offers personal loans with rates from 5.99% to 23.99%.
  • Lender B offers personal loans with rates from 7.99% to 16.99%.

Therefore, you could get quotes from different lenders and be offered completely different interest rates, even if the loan amount and repayment term are exactly the same.

Without a doubt, you’d like to get approved for the lowest rate possible.

Ultimately, it will depend on your financial credentials, especially your credit score.

Note: Don’t assume that a personal loan with a lower interest rate range is the best. Another lender’s rate range may not seem attractive at first, but it may be the one that offers the lower rate based on your particular credit.

The Importance of Your Credit Score

Your credit score is essential to all kinds of borrowing, including personal loans.

A higher credit score means you’re more likely to get approved for the personal loan.

Additionally, it means that you’re more likely to qualify for a lower interest rate because the lender has high confidence in your ability to repay the loan.

Lower interest rates will yield lower monthly payments -- and a lower total cost of borrowing (total interest paid) in general.

Therefore, it is vital that your credit score is in great shape because it could mean the difference of thousands of dollars.

Your FICO score

More than 90% of U.S. lenders rely on the FICO credit score when reviewing a borrower’s loan application.

If you’re thinking about a personal loan, take note of how your credit score is calculated so that you make the effort to improve it before submitting your application.

Payment history

Your on-time payments on loans and credit lines are tracked here. The key part here is to avoid missed or late payments -- a sign of financial irresponsibility.

Amounts owed

When your use a large amount of your available credit, it appears that you’re borrowing to stay afloat financially.

Your credit utilization ratio is determined by dividing your outstanding balance by your credit limit. Generally, you want to keep this ratio below 30%.

Pay down your debt or increase your credit limits to reduce this ratio.

Age of accounts

A long history of responsible credit usage is a good sign to borrowers.

This factors is based on the average age of your credit accounts. So, it encourages that you keep existing credit lines open for as long as possible.

Credit mix

Being able to manage different kinds of credit is a plus.

From installment loans (e.g., student loans, mortgages, car loan, etc.) to revolving credit lines (e.g., credit cards), you can exhibit strong credit management by have a diverse credit mix.

New inquiries

When you apply for too many loans over a short period of time, you may appear to be desperate to borrow money.

Ideally, you do not apply for any new credit lines if you’re about to take out a personal loan.

Summary

In conclusion, your monthly payment depends on these key factors:

  • Loan amount
  • Repayment term
  • Interest rate (based on your credit)

Using the personal loan calculator, you can get an estimate of your monthly payment after you’ve provided these details.

We’ll even recommend the best personal loans that offer the lowest interest rates based on your desired loan amount and repayment term.

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