Loan Payment Calculator
Unsecured borrowing
Personal loans are generally unsecured — no asset backs them. That makes rates higher than mortgages or auto loans, where the lender can repossess something, but it also means no property is at risk if you cannot pay.
Rates vary widely with credit profile, far more than secured lending does. The spread between the best and worst offers for the same loan can be enormous.
Fixed structure
Most personal loans carry a fixed rate and a fixed term, so the payment never changes and the end date is known from the start. This is the main advantage over revolving credit, where it is possible to pay for years without the balance moving.
Debt consolidation
The common use is consolidating credit card balances onto a lower rate with a defined payoff date. The arithmetic works when the loan rate is meaningfully below the cards' and the term is not so long that it undoes the saving.
The failure mode is behavioural rather than mathematical: the cards get paid off, then used again, and the borrower ends up with the loan and fresh card balances. Consolidation only helps if the underlying spending changes.
Watch the origination fee
Many personal loans deduct an origination fee from the amount disbursed. Borrowing $10,000 with a 5% fee means $9,500 arrives while interest accrues on the full $10,000.
APR accounts for this, which is why APR rather than the nominal rate is the number to compare.
Before borrowing
- Check for prepayment penalties if you might repay early
- Compare APR including all fees, not headline rates
- Confirm whether a rate quote is a soft-check estimate or a firm offer
- Be wary of terms long enough that total interest exceeds what you are consolidating