A personal loan has a simple structure: you borrow a fixed amount and repay it with equal monthly payments. The two choices that matter most are the APR and the term. This guide uses a $25,000 loan to show how both change what you pay.
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Term: lower payment or lower cost
At 10.5% APR on $25,000:
| Term | Monthly payment | Total interest | Total paid |
|---|---|---|---|
| 24 months | $1,159.40 | $2,826 | $27,826 |
| 36 months | $812.56 | $4,252 | $29,252 |
| 60 months | $537.35 | $7,241 | $32,241 |
Stretching from 36 to 60 months cuts the payment by about $275 but adds roughly $2,990 in interest.
APR: the rate you are offered
Over 36 months on $25,000:
| APR | Monthly payment | Total interest |
|---|---|---|
| 7.5% | $777.66 | $2,996 |
| 10.5% | $812.56 | $4,252 |
| 15% | $866.63 | $6,199 |
Going from 7.5% to 15% adds about $89 a month and more than $3,200 in interest.
Origination fees
Some lenders charge an origination fee taken out of the money you receive. A 3% fee on $25,000 is $750, so you would receive $24,250 but still repay $25,000. When comparing offers, use the APR, which includes certain fees, rather than the interest rate alone.
Paying a little extra
On the 36-month loan, adding $100 a month finishes the loan in 32 months and saves about $544 in interest, if your lender has no prepayment penalty.
Checklist before you borrow
- Check your budget, not just the monthly payment. Add the payment to your other debts.
- Compare APRs from several lenders. Prequalification often uses a soft credit check.
- Look for origination fees, late fees and prepayment penalties.
- Pick the shortest term you can comfortably afford.
Frequently asked questions
Is APR the same as the interest rate?
No. APR includes certain fees along with interest, so it is a better way to compare. The calculator uses the APR you enter as the loan rate.
Can a personal loan consolidate credit card debt?
Sometimes. If the loan APR is lower than your card APR and you stop adding new card balances, it can reduce interest. Compare the total cost, including fees.
Does the calculator include late fees?
No. Late fees and rate changes are not modeled.
This article is for general education and uses estimates. It is not financial, tax or legal advice. Your actual numbers depend on your lender, employer, tax situation and location. See our disclaimer.