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.

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