Personal Loan Calculator

• Unsecured - no asset backs the borrowing, so the lender relies on your income and credit record alone. This is why rates exceed mortgage rates.
• Fixed term and fixed payment - a set number of months with a set amount, which makes budgeting straightforward.
• Usually fixed rate - unlike a mortgage or credit card, the rate generally does not move when base rates change.
• Usually fixed purpose - lenders often require a stated purpose such as consolidation, home improvement, or a large purchase.
• Repaid by direct debit, with no security to repossess but real consequences for missing payments.

Note. Because there is no security, approval and rate depend heavily on credit history and verified income. A strong record can reduce the rate substantially; a weak one may mean refusal or a much higher price.

Two loans advertised at the same rate can cost very different amounts. Fees are the reason.

• Origination fees are often deducted from the advance - you repay interest on the fee before you ever receive it.
• APR is designed to capture this and is the figure to compare across lenders.
• Some lenders charge nothing upfront and recover cost through the rate instead - the headline may look worse while the total is better.
• Always compare on identical amounts and terms. A cheaper rate on a larger loan or a longer term proves nothing.

• Longer terms lower the payment but raise the total cost sharply. Moving from 3 to 5 years cuts the payment by $131 but adds $1,250 in interest.
• Personal loan terms are already short compared with mortgages, so the term lever is less dramatic - but still significant.
• Match the term to the life of what you bought. Financing a durable purchase over a long term is reasonable; financing a consumable over five years is not.
• The payment must fit your actual budget - not the maximum a lender will approve.

1. Works when the new rate is genuinely lower than what it replaces, and total cost over the new term is lower than continuing as you were.
2. Works when you stop using the cleared accounts. Consolidating credit cards without closing or freezing them almost always results in the balances rebuilding alongside the new loan.
3. Fails when the term is extended enough to hide a higher cost. A lower monthly payment can still mean more total interest.
4. Fails when fees consume the saving. Check the break-even point in months.
5. The discipline requirement is the real test. The arithmetic is easy; the behaviour change determines the outcome.

The consolidation wins clearly - but only if the cards stay cleared. If the balances return, the borrower now carries both the loan and the cards.

• Missing payments damages your credit record and can trigger penalty charges and higher rates on other borrowing.
• Hard searches remain visible for a period - applying to many lenders in a short window can reduce your score.
• Payment protection and add-ons are frequently poor value and should be assessed on their own merits, not accepted by default.
• Early repayment may be permitted without charge or may incur a fee - check before committing.
• Over-borrowing is the common failure. A maximum offer is not a recommendation, and a payment that leaves no margin will eventually break.