Personal Loan Calculator
Smart Borrowing: Understanding Personal Loans
When to Consider a Personal Loan
Personal loans can be a smart financial tool when used responsibly:
- Debt consolidation: Combine high-interest debts into one lower payment
- Home improvements: Finance renovations that add value to your home
- Major purchases: For essential items when savings aren't enough
- Emergency expenses: When you have no emergency fund available
Personal Loan vs. Credit Cards
| Factor | Personal Loan | Credit Card |
|---|---|---|
| Interest Rate | Fixed, typically lower | Variable, often higher |
| Repayment Term | Fixed (1-7 years) | Open-ended |
| Monthly Payment | Fixed amount | Minimum payment varies |
| Best For | Large, one-time expenses | Ongoing, smaller purchases |
5 Tips for Getting the Best Loan Terms
- Check your credit score: Higher scores get better rates (aim for 700+)
- Shop around: Compare offers from multiple lenders
- Consider shorter terms: Lower rates but higher payments
- Watch for fees: Some lenders charge origination fees (1-6%)
- Read the fine print: Look for prepayment penalties or other restrictions
Pro Tip: Use the 28/36 rule to determine how much you can afford to borrow. Your total monthly debt payments (including the new loan) shouldn't exceed 36% of your gross monthly income, with housing costs not exceeding 28%.
Average Personal Loan Rates by Credit Score
Credit Score Range
Avg Interest Rate
720-850 (Excellent)
10.3% - 12.5%
690-719 (Good)
13.5% - 15.5%
630-689 (Fair)
17.8% - 19.9%
300-629 (Poor)
22.5% - 28.5%