A personal loan is a versatile financial product that allows individuals to borrow a fixed amount of money from a lender and repay it over a set period with interest. This calculator helps you estimate your monthly payments, the total interest you'll pay, and the overall cost of your loan. Understanding these figures is crucial for budgeting and making informed financial decisions.
How Personal Loans Work
When you take out a personal loan, you receive a lump sum amount. You then agree to repay this amount, plus interest, in regular installments, typically monthly. The interest rate is the cost of borrowing money, expressed as an annual percentage of the principal loan amount.
The Math Behind the Calculation
The calculation for a personal loan payment typically uses the annuity formula, which determines the fixed periodic payment needed to amortize a loan. The formula is as follows:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment
P = The principal loan amount (the amount you borrow)
i = Your monthly interest rate (the annual interest rate divided by 12)
n = The total number of payments over the loan's lifetime (the loan term in years multiplied by 12)
Example Breakdown:
Let's say you want to borrow $15,000 (P) with an annual interest rate of 8% (which is 0.08 / 12 = 0.006667 monthly, or i) for a term of 3 years (which is 3 * 12 = 36 monthly payments, or n).
This calculation results in a monthly payment (M) of approximately $467.71.
Total Interest Paid is calculated by subtracting the principal loan amount from the total amount repaid over the loan's life: (Monthly Payment * Total Number of Payments) - Principal Loan Amount. In our example: ($467.71 * 36) - $15,000 = $16,837.56 - $15,000 = $1,837.56.
Total Repayment is simply the sum of all monthly payments: Monthly Payment * Total Number of Payments. In our example: $467.71 * 36 = $16,837.56.
Key Factors to Consider
Credit Score: A higher credit score generally leads to lower interest rates.
Loan Term: Longer terms mean lower monthly payments but more total interest paid. Shorter terms have higher monthly payments but less total interest.
Fees: Be aware of origination fees or other charges that might increase the overall cost of the loan.
Use this calculator to explore different scenarios and find the personal loan that best fits your financial needs.
function calculateLoan() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var monthlyPayment = 0;
var totalInterestPaid = 0;
var totalRepayment = 0;
if (isNaN(loanAmount) || loanAmount <= 0) {
alert("Please enter a valid loan amount.");
return;
}
if (isNaN(annualInterestRate) || annualInterestRate < 0) {
alert("Please enter a valid annual interest rate.");
return;
}
if (isNaN(loanTerm) || loanTerm 0) {
// Calculate monthly payment using the annuity formula
var numerator = Math.pow(1 + monthlyInterestRate, numberOfPayments);
monthlyPayment = loanAmount * (monthlyInterestRate * numerator) / (numerator – 1);
} else {
// If interest rate is 0, payment is just principal divided by number of payments
monthlyPayment = loanAmount / numberOfPayments;
}
totalRepayment = monthlyPayment * numberOfPayments;
totalInterestPaid = totalRepayment – loanAmount;
document.getElementById("monthlyPayment").innerText = "$" + monthlyPayment.toFixed(2);
document.getElementById("totalInterestPaid").innerText = "$" + totalInterestPaid.toFixed(2);
document.getElementById("totalRepayment").innerText = "$" + totalRepayment.toFixed(2);
}