How a personal loan is repaid
A personal loan is an unsecured installment loan: you receive a lump sum and pay it back in equal monthly amounts over a fixed term. Each payment is divided between the interest accrued that month and a principal reduction.
Because interest is charged on the remaining balance, the earliest payments lean heavily toward interest. As the balance falls, that split shifts and the principal share grows until the loan is fully cleared at the end of the term.
Understanding the result
The monthly payment is the fixed amount you owe each month. Total interest is the cost of borrowing over the whole term, and total cost is that interest plus the original loan amount.
The donut chart contrasts the amount you borrowed with the interest you pay on top of it, and the balance line shows the debt declining year by year toward zero.
Borrowing smart
A lower APR and a shorter term both reduce what you ultimately repay.
- Compare APR rather than the headline rate, since APR folds in required fees.
- Check your credit before applying — a stronger score usually unlocks a lower APR.
- Borrow only what you need; a smaller principal means less interest.
- Confirm there is no origination fee or prepayment penalty in the loan terms.
A note on assumptions
This calculator assumes a single fixed APR and equal payments with no fees added to the balance. If your lender charges an origination fee or the rate is variable, your real cost will differ from the estimate shown.
Formula
r = APR/100/12; payment = P·r / (1 − (1+r)⁻ⁿ)Frequently asked questions
- Is APR the same as the interest rate?
- APR includes the interest rate plus most required fees expressed as a yearly rate. If your loan has no extra fees, APR and interest rate are the same.