A loan is a sum of money borrowed from a lender that you agree to repay over time with interest. The lender makes money by charging you more than you borrowed — that extra amount is the interest. Most consumer loans are fully amortizing, meaning each payment covers both interest due on the current balance and a portion of the principal, so the balance steadily decreases to zero by the final payment. The four variables that define any loan are: principal (amount borrowed), interest rate (annual cost in percent), term (repayment period), and fees (origination charges, application fees, etc.).

The interest rate is the annual percentage the lender charges on the outstanding principal balance. The APR (Annual Percentage Rate) is the interest rate plus all mandatory fees (origination fee, processing fee, etc.) expressed as an annual percentage of the net amount actually received. APR is always higher than the interest rate when fees are present, and is the most accurate measure for comparing loan offers. Under the federal Truth in Lending Act, all US lenders must disclose APR before you sign. When comparing two loans, always compare APRs — not stated interest rates — to identify the cheaper option.

Most mainstream personal loan lenders require a minimum credit score of 600–640. For the best rates (below 12%), you generally need 720 or above. Some online lenders and credit unions will lend to borrowers with scores as low as 560–580, but at significantly higher rates (28%–36%+). Beyond credit score, lenders evaluate your debt-to-income ratio, employment history, and income stability. If your credit score is below 640, improving it before applying — even by 40–60 points — can reduce your interest rate by 4–8 percentage points, saving thousands over the loan term.

Shorter terms mean higher monthly payments but dramatically less total interest paid. Longer terms mean lower monthly payments but significantly more total interest. On a $15,000 loan at 12.26%: a 36-month term costs $501/month but only $3,036 in interest. A 60-month term costs $337/month but $5,220 in interest — 72% more total interest for a 25% lower monthly payment. The right choice depends on your cash flow situation. If you can comfortably afford the shorter-term payment, it always wins on total cost. If the lower payment is needed to keep your finances stable, the longer term is the right practical choice — just be aware of the true cost difference.

Yes — for standard amortizing loans with no prepayment penalty. Every extra payment you make reduces the principal balance, which reduces the interest charged in every future month. The savings compound over time: paying an extra $100/month on a $20,000 loan at 12.26% over 60 months saves approximately $1,200 in interest and pays off the loan 12 months early. However, always check for prepayment penalties — some auto loans and personal loans charge a fee if you pay off early. If the prepayment penalty equals several months of interest, the math may not favor early payoff. Use the Early Payoff mode above to calculate your specific savings.

An origination fee is a one-time upfront charge, typically 1%–9.99% of the loan amount, deducted from the disbursement. You borrow $15,000 but receive $14,250 after a 5% origination fee — yet you still repay the full $15,000 plus interest. Not all lenders charge origination fees. Credit unions and some online lenders (like LightStream) offer zero-fee personal loans. However, a loan with a slightly higher rate but no origination fee isn't always cheaper — it depends on the loan term. Use the APR vs. Rate mode or Loan Comparison mode to compare the total all-in cost of fee vs. no-fee options. For shorter loan terms, no-fee loans often win. For longer terms, a slightly higher rate with no fee can still beat a lower rate with a large fee.

Debt consolidation makes financial sense when: (1) the new consolidation loan rate is meaningfully lower than your current average weighted interest rate; (2) you can consolidate without significantly extending your payoff timeline; and (3) the origination fee on the new loan doesn't erase the interest savings. It's most powerful for high-rate credit card debt (20%–29% APR) consolidated into a personal loan (10%–15%). It's less beneficial when you're consolidating loans that are already at low rates, or when you extend a near-payoff loan into a long new term. Run the numbers using the Consolidation mode, and look at both monthly payment relief AND total interest paid — both matter.

A mortgage is technically a type of loan — specifically, a secured loan used to purchase real estate, where the property itself serves as collateral. All mortgages are loans, but not all loans are mortgages. Key differences: mortgages typically have much larger principal amounts ($200,000–$1M+), much longer terms (15–30 years), significantly lower interest rates (currently ~6.65%) because they're secured by the property, additional costs built into the monthly payment (property tax, insurance, possibly PMI and HOA fees), and a formal closing process with legal transfer of title. Personal loans are unsecured, have shorter terms (1–7 years), higher rates (6%–36%), and fund in days rather than weeks. Use the Mortgage Calculator for home purchase planning and this Loan Calculator for all other borrowing needs.

Always compare the total cost of borrowing — not just the monthly payment or stated interest rate. The total cost includes all interest paid over the full term plus all upfront fees. Use this calculator's Loan Comparison mode: enter the amount, rate, term, and origination fee for each offer. The calculator computes the true APR and total all-in cost for each option and highlights the winner. One critical tip: get quotes within a 14–45 day window (lenders vary). Multiple hard credit inquiries for the same loan type within this window are typically treated as a single inquiry by credit bureaus under FICO's "rate shopping" policy, so shopping around won't hurt your credit score.

The best source depends on your credit profile and loan purpose. Credit unions consistently offer the lowest rates (often 2–4% below banks) for members — if you qualify, always check your credit union first. Online lenders (SoFi, LightStream, Marcus, Discover) offer fast funding (1–3 days), competitive rates for good credit borrowers, and often no origination fees. Traditional banks may offer relationship discounts for existing customers. Peer-to-peer platforms (LendingClub, Prosper) can work for fair credit borrowers but typically charge higher origination fees. For any source, pre-qualify with a soft credit check before submitting a full application — this lets you see your likely rate without affecting your credit score.