Understanding Your Loan
When you take out a loan, you aren't just paying back the money you borrowed (the Principal). You are also paying for the privilege of borrowing that money (the Interest). Our calculator shows you exactly how much extra that interest will cost you over the life of the loan.
🚗 Auto Loans
Typically 36 to 84 months. Interest rates are lower for new cars than used cars. Shorter terms mean higher monthly payments but less total interest.
💳 Personal Loans
Unsecured loans used for debt consolidation or large purchases. Rates depend heavily on your credit score, ranging from 6% to 36%.
How to Use This Calculator
- Loan Amount: Enter the total amount you plan to borrow.
- Interest Rate: The annual percentage rate (APR). If you have a credit score below 700, expect rates above 10%.
- Loan Term: Choose how many months you have to pay it back. 60 months (5 years) is standard for car loans.
Simple Interest vs Compound Interest
Most personal and auto loans use Simple Interest or pre-computed interest, meaning you pay interest on the remaining principal balance. This is good for you! It means if you pay off the loan early, you save money on interest.
Note: Some predatory contracts have "prepayment penalties." Always check the fine print.
Frequently Asked Questions (FAQ)
What is a good interest rate for a personal loan in 2025?
In 2025, a "good" rate is generally considered to be below 10% for borrowers with excellent credit (720+). Average rates hover around 12-15%, while rates for poor credit can exceed 25%.
Does loan term affect my interest rate?
Yes. Short-term loans usually have lower interest rates because they are less risky for the lender. However, lenders sometimes offer promotional rates on longer terms for auto loans to sell more expensive vehicles.
How can I lower my monthly payment?
You have three options:
- Borrow less money (increase your down payment).
- Extend the loan term (e.g., go from 48 months to 60 months).
- Refinance to a lower interest rate if your credit score improves.