Personal loan calculator

James Rodriguez James Rodriguez  updated on 2021-12-06
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INTEREST
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MONTHLY
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Are you wondering how much you borrow? Maybe you are wondering what your personal loan repayment looks like?

Our personal loan interest rate calculator will let you calculate your monthly payments.

The page explains how personal loans work, how lenders calculate personal interest rates, and how to project what your personal loan could look like.

How does our personal loan calculator work?

Wondering how much you can borrow? Our personal loan calculator tool allows you to estimate what you would owe on a hypothetical loan with a fixed interest rate. Just fill in the following variables:

  • The desired amount borrowed
  • The length of the repayment term
  • The interest rate

The personal loan calculator will show you your monthly payments and an annual amortization schedule. This tool can help you estimate your ability to pay back what you want to borrow. It is useful to know this before approaching a lender.

Unsure what to put for the interest rate? You can get an estimated personal loan interest rate by clicking on your credit score range.

How does a personal loan work?

A personal loan, or consumer loan, allows a borrower to finance a personal need. Personal loans can be used to pay for:

  • Personal projects
  • Trips
  • Weddings
  • Unexpected car repairs
  • Home renovations
  • Debt consolidation
  • Almost anything else

After being approved, a borrower receives a lump sum of money. In exchange, they agree to pay it back with interest in regular instalments. These instalments generally range from 6 to 60 months in Canada. Unsecured personal loans are quick to be approved, often in 24 hours. Personal loans may be offered by traditional lenders like banks and credit unions, or alternatives including online lenders, payday lenders, pawnshops or even private lenders.

In the market for a personal loan? Try our personal loan comparison tool to see the best rates quickly and anonymously.

Compare personal loan interest rates in seconds

Find the best interest rate

Secured loans vs unsecured loans:

Personal loans may be secured or unsecured.

Secured loans are backed by collateral like a home or automobile. The borrower pledges them as a backup plan to pay the bank back. If the borrower defaults on the loan, the lender can repossess the pledged collateral. This extra security enables the bank to offer the loan at a lower interest rate.

Unsecured loans do not require collateral. As a result, they are fast to approve. While they are safer to the borrower, who has no risk of losing their automobile or home, they are riskier to a bank. Therefore they will apply a higher interest rate.

Why choose a secured loan? 

  • Lower interest rates 
  • Larger loans available
  • Lower credit scores eligible

Why choose an unsecured loan?

  • Quick approval
  • No risk to pledged collateral
  • May be cheaper than borrowing with a credit card

Never borrow more than you can comfortably repay. Remember that a loan is a legal agreement between a lender and a borrower.

Fixed interest rates vs variable interest rates

The interest rate applied to a personal loan can be fixed or variable. Fixed rates remain the same for the life of the loan. If you receive the fixed interest rate of 10% that is what you can expect to pay for the lifetime of the loan.

Variable rates, as the name implies, vary. They are based on the prime rate set by the Bank of Canada The lender will apply a few percentage points to the prime to set your rate. This means that you might get a loan at prime plus 7%. At the time of publication, the prime rate is 2.45%*, so a borrower would start their loan paying 9.45%. This could go lower or higher if the Bank of Canada changed the prime rate.

*Note that 2.45% is historically very low.

Why choose a fixed interest rate?

  • Always know what you will pay
  • Possiblity of locking in a low rate

Why choose a variable interest rate?

  • Save money if the rates go down
  • Often start at less than fixed rates

How do you calculate your borrowing capacity for a personal loan?

Your borrowing capacity is the amount of money you are able to borrow from a lender. 

The basic formula for calculating borrowing capacity is:

Borrowing capacity = income – fixed expenses

This is, however, a simplification. Lenders will base the amount that they will lend you on criteria including:

  • Your debt ratio
  • The type of loan (fixed or variable rate)
  • The amount of the monthly payments
  • The duration of the loan

What banks look at when evaluating borrowing capacity

Sources of income:

  • Salaries and wages
  • Retirement pensions
  • Rental properties income 
  • Dividends and investment income
  • Etc

Expenses considered:

  • Existing loan payments (automobile loans, home loans, personal loans, etc.)
  • Rent
  • Alimony payments 
  • Etc

This list is not exhaustive. Different lenders take into account different criteria. One lender may offer you a higher loan than another. 

The debt ratio

Calculate your debt ratio by dividing your existing debt by your overall income. Multiply that percentage by 100 to get your debt ratio.

Debt ratio = (existing debt * income) * 100

While every lender is different, most will look for a debt ratio under 33%. Depending on the lender and your situation, you may be denied a personal loan under this ratio. Someone else might be approved while being above it. 

Personal loan amortization schedule

Amortization refers to the process of paying down debt. With every instalment payment on a loan, the balance loan shrinks. A portion of each payment goes towards the principal and interest. 

A personal loan amortization schedule lets you know how much you still owe at the end of each payment. To give a very simple example, imagine borrowing $1,000 at 10% for one year. 

Every month you pay $88. Over twelve months, this adds up to a total of $1,056. You pay $88 in month one. The bank applies $80 to the principal and $8 to interest. Over time the interest paid declines as more and more is applied to the principal. In the final month of the loan, you pay $1 towards interest and $87 towards the principal. 

How is interest calculated on a personal loan?

Lenders usually give interest rates for personal loans as an annual percentage. 

At its most simple, interest is calculated using this formula:

Interest = principal * interest rate * time

For example, a $2,000 personal loan at a 9% interest rate paid over two years would look like this:

MonthBeginning balanceInterestPrincipalEnding balance
12,000.0015.0076.371,926.63
21,926.6314.4376.941,846.69
31,846.6913.8577.521,769.17
41,769.1713.2778.101,691.07
51,691.0712.6878.691,691.07
61,691.0712.0979.281,533.11
71,533.1111.5079.871,453.23
81,453.2310.9080.471,372.76
91,372.7610.3081.071,291.69
101,291.699.6981.681,210.01
111,210.019.0882.291,127.71
121,127.718.4682.911,044.80
131,044.807.8483.53961.27
14961.277.2184.16877.11
15877.116.5884.79792.32
16792.325.9485.43706.89
17706.895.3086.07620.82
18620.824.6686.71534.11
19534.114.0187.36446.75
20446.753.3588.02358.73
21358.732.6988.68270.05
22270.052.0389.34180.70
23180.701.3690.0190.69
2490.690.6890.690.00
Personal loan amortization schedule example

Monthly payments are $91.37. The borrower would pay a total of $2,192.87. The original $2,000 they borrowed plus $192.87 in interest.

How much are personal loan interest rates?

Our team has observed personal loan rates at low at 3%, but most a far higher. It is not rare to see an unsecured personal loan for borrowers with bad credit that exceed 30%. Note that the maximum legal annualized interest rate in Canada is 60%.

The answer to the question “what is a good personal interest rate” is different from one borrower to another. Lenders consider many factors when evaluating a borrower’s creditworthiness. These include:

  • Employment status
  • Monthly income
  • Credit score
  • The amount of the loan
  • Whether the loan is secured or unsecured

A borrow with excellent credit inquiring with a large, traditional bank can expect a loan in the single digits. Personal loans, often unsecured, come at a higher interest rate than a car loan or a mortgage.

Shopping for a personal loan? Try our anonymous comparision tool and compar rates in just seconds.

Compare personal loan interest rates in seconds

Find the best interest rate

How do credit scores impact personal loan interest rates?

Your credit score is a numerical representation of your creditworthiness to a lender. It is based on your history of taking on and paying back debt. The score ranges from 300 (a very poor score) to 900 (an excellent score). These scores are given by the credit rating agencies Equifax and TransUnion. The higher the number the greater yours chances of having your loan application approved and getting the best personal loan interest rate

Credit scores categories by number

Credit score number Category
Above 760Excellent
725-759Very good
660-724Good
560-659Fair
Below 559Poor
Personal loan: credit score ranges

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