This personal loan calculator calculates your monthly payment, total paid, interest and the payoff date (other repayment frequencies are allowed: weekly or bi-weekly). There is more information on this subject below the application form.
How does this personal loan calculator work?
This is a very flexible financial tool that can help whenever looking to compare between multiple personal loans offers as it allows choosing from a wide range of repayment frequencies.
The general terminology in case of a personal loan is defined here:
- Loan amount which represents the amount borrowed;
- Term which is the period of time the borrower has to pay back the principal plus the interest for the debt;
- Annual interest rate which is the relative cost of money taken expressed as a percentage. Please note that in general interest rates in personal loans are higher than in case of secured loans due to the associated risk of a default.
- Payment frequency which in most cases is monthly, but it can also be weekly, bi-weekly, bi-monthly, quarterly, semi-annually or even annually. This aspect is a critical one as it further on determines the level of regular payments to be made.
- Assumed start date which is used to forecast the calendar date when the borrower will pay in full the loan.
The algorithm behind this personal loan calculator uses the standard loan formula and returns a payment summary that consists of the following information:
- Monthly/other frequency payment figure
- Total paid for the loan obtained as principal + interest
- Total interest
- Estimated calendar payoff date
Example of a calculation
Starting May 2015, someone wants to take a personal loan of $10,000, over the next 2 years while the yearly interest percentage is 7%. Let’s discover the repayment details:
■ Monthly payment: $447.73
■ Loan amount: $10,000.00
■ Total Paid: $10,745.42
■ Total Interest Paid: $745.42
■ Loan term: 24 months
■ Annual Interest rate: 7.00 %
■ Payment frequency: Monthly
■ Estimated payoff date: April, 2017
Peculiarities of personal loans
- Its length varies from few months to 5 years maximum. Most often personal loans are taken for a period of 2-4 years.
- Since it is an unsecured loan the amount that can be borrowed is significantly smaller than in case of secured loans.
- As a result that it does not require any special warranties a personal loan comes with higher payments on interest in comparison to other secured ones. This is because the higher the risk the higher the interest rate will be.
- Even though the procedure of applying and taking money through a personal loan is quite simple bank run check about your credit history and debt to income ration that may limit the amount you can actually take.