How personal loan payments work
Personal loans are usually unsecured installment loans with a fixed rate and fixed monthly payment. You get the money upfront and repay it over two to seven years. Common uses include debt consolidation, home improvements, medical bills and large purchases.
Interest rate vs. APR
Many lenders charge an origination fee, often 1% to 10% of the loan, which is taken out before you receive the money. You still repay the full loan amount, so the real cost is higher than the interest rate suggests. The APR includes this fee. This calculator finds it by solving for the rate at which your payments equal the cash you actually receive.
If you need a specific amount in hand, borrow enough to cover the fee: divide what you need by (1 − fee %).
Is a personal loan good for paying off credit cards?
If your loan APR is well below your card APR, consolidating can save a lot of interest and gives you a fixed payoff date. The savings disappear if you run up the cards again, so many people lower their limits or stop using the cards while repaying.
How to get the best rate
- Prequalify with several lenders. Most use a soft credit check that does not affect your score.
- Compare APR, not just the rate, and look for lenders with no origination fee.
- Choose the shortest term with a payment you can afford.
- Check for autopay discounts and rate discounts for paying creditors directly.
Frequently asked questions
What credit score do I need for a personal loan?
Many lenders accept scores in the 600s, but the best rates usually go to borrowers with scores of 720 or higher and a low debt-to-income ratio.
Can I pay off a personal loan early?
Most personal loans have no prepayment penalty, so paying early reduces total interest. Confirm this in your loan agreement.
Does a personal loan hurt my credit?
A new loan adds a hard inquiry and a new account, which can lower your score slightly at first. On-time payments and lower card utilization often raise it over time.
How fast can I get the money?
Many online lenders fund within one to five business days after approval, and some offer same-day or next-day funding.
Estimates only. Your rate, fees and approval depend on the lender and your credit profile.