|Credit Score||Average Interest Rate|
|Excellent (720 – 850)||12.5%|
|Good (690 – 719)||15.5%|
|Average (630 – 689)||19.9%|
|Poor (300 – 629)||32.0%|
If you have an excellent credit score, you may qualify for a 0% balance transfer credit card, which could be a cheaper option than a personal loan.
How Do You Calculate Payments on a Personal Loan?
If you want to calculate your monthly loan payment yourself, divide the total amount you’ll pay (including the principal and interest) by the loan term (in months). For example, say the total amount you’ll pay is $2,400, and the loan term is 24 months. Your monthly loan payment would be $100 ($2,400 ÷ 24 = $100).
In general, your monthly payment stays the same for the entire loan term. However, the payment may change if you ask your lender for a deferment. A deferment allows you to take a scheduled break from payments if you have a financial hardship—due to a job loss, medical emergency, or national emergency.
Keep in mind that the interest may continue to accrue during the deferment period. If it does, you’ll have a higher total amount to pay off—which means either a higher monthly payment moving forward or a longer loan term (or both). If you’re getting a deferment, clarify the terms with the lender before you agree to it.
What Are the Most Common Term Lengths for a Personal Loan?
Personal loans come in various term lengths, but most are between two and five years. Still, you can find personal loans with longer payback periods—as high as 15 years.
With a longer-term loan, however, keep in mind that your rates could be higher, and you will end up paying more interest overall than you would with a shorter-term loan. Moreover, a long-term personal loan also means having a prolonged debt burden, plus more opportunities to make late payments, which could damage your credit.
How to Use a Personal Loan Calculator
Our loan calculator shows what your monthly payment, total interest paid, and total paid amounts might be, based on inputs you provide. That information is helpful for a few reasons:
- You can try different scenarios before you commit to a loan. Be sure to try different loan-term lengths to see how that affects your monthly payment and total interest.
- You can see if the monthly payment fits into your budget. If the payment is too high, try a longer loan term.
- You can decide if you’re willing to pay the total amount of interest in exchange for the loan. If it’s too high, try a shorter loan term.
If changing the loan term length doesn’t get you the loan you want, you may be able to lower your loan costs if you:
Where Can I Get a Personal Loan?
In general, you have three choices for where to get a personal loan: Online lenders, credit unions, and banks. Here’s a quick look at each option:
Not surprisingly, the online personal loan market is extremely competitive. For borrowers, that can be a good thing: To attract customers, online lenders often offer benefits like competitive rates, low/no fees, and flexible payment options. In addition, the online option can be the fastest and most convenient way to get your money.
Credit unions offer financial services to people who live, study, work, or worship in the community. To apply for a personal loan, you’ll have to be a member of the credit union, and you may be required to have a minimum savings account balance. Still, credit unions often have attractive rates, and they tend to be more willing to work with borrowers who have lower credit scores and thin credit histories.
Banks typically have higher interest rates and tougher lending requirements than credit unions, but you don’t have to worry about the membership issues. And, if you’re already a customer at the bank—especially a local community bank—you might get perks like lower rates or being able to qualify for a bigger loan.
The Bottom Line
To find the best personal loan for your financial situation, be sure to shop around and compare rates, fees, and repayment terms from several lenders. And, of course, be sure to use our loan calculator to test out different options to find a scenario that fits your goals and budget.—Jean Folger