See your monthly payment and what the loan really costs once the origination fee is counted, including the APR the fee creates.
Your loan
$
%
Origination fee
%
Your personal loan
Monthly payment
$0
APR including the fee
$0
Cash you receive—
Origination fee—
Balance you repay—
Total interest—
Total cost (interest + fee)—
Total of all payments—
Borrow this to receive the full loan amount in cash—
How this is calculated
Monthly payment: M = P × r(1+r)n ÷ ((1+r)n − 1), with P = the balance you repay, r = interest rate ÷ 12 and n = months.
Fee taken out of the loan: you repay the full loan amount but receive the amount minus the fee. Fee added to the balance: P = loan amount + fee.
APR including the fee = the annual rate at which the monthly payments exactly repay the cash you actually receive (solved numerically), the same idea as the APR on a Truth in Lending disclosure.
A personal loan is usually a fixed-rate installment loan: the same payment every month until it is paid off. Many lenders also charge an origination fee, often 1% to 10% of the loan, and most take it out of the money they send you. That is why two loans with the same interest rate can have very different costs. The APR adds the fee to the interest cost, which makes it the better number for comparing offers (see APR vs. interest rate).
Before you sign, compare the APR, the total you will repay and whether there is a prepayment penalty. If you are consolidating credit card debt, check that the new payment and the total interest are lower than your current plan with the credit card payoff calculator, and read when a debt consolidation loan makes sense.
Common questions
What is a good APR on a personal loan?
It depends mostly on your credit score, income and existing debt. Borrowers with strong credit get the lowest rates; with fair or poor credit, APRs can be several times higher. Compare offers from banks, credit unions and online lenders using prequalification, which usually does not affect your credit score.
Why is the APR higher than my interest rate?
Because the APR includes the origination fee. If the fee is taken out of the loan, you pay interest on money you never received, so the effective cost is higher than the stated rate.
Is a shorter term better?
A shorter term has a higher monthly payment but much less total interest. Choose the shortest term whose payment fits comfortably in your budget.
Can I pay a personal loan off early?
Most personal loans allow it without a penalty, which saves interest, but check your loan agreement for a prepayment penalty before signing.