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Tips for Paying off Personal Loans
- Set up automatic payments. You can typically set up automatic monthly payments through your online account. The benefit to this is that you’ll never forget to make a payment, as the money will automatically get withdrawn as long as there’s enough in your bank account.
- Pay off your loan early. Personal loans have set monthly payments, but you’re allowed to pay more or make payments more often if you want to. The sooner you pay off your loan, the less total interest you’ll owe. Just make sure your lender doesn’t charge a fee for paying off your loan early – this is rare, but it’s always good to check.
- Refinance expensive debts. If your current personal loan APR is very expensive and you’ve increased your credit score and/or income since you took the loan out, you may want to apply for a cheaper personal loan and use it to pay off your current loan. You could also consider moving the balance to a balance transfer credit card.
- Make a strict budget. The more spending you can cut back on, the more money you can put toward paying off your personal loan and becoming debt-free. You can also start building an emergency fund to help reduce the chances that you’ll have to take out more loans in the future.
- Consolidate your debt. If you have multiple debts, you may want to take out a debt consolidation loan or credit card to pay them off and move all of the debt to one place. This is usually only worth doing if you can get a lower interest rate on the new loan or credit card than the rate on your existing debts.
The more you pay each month toward your personal loan, the less interest you’ll owe over the life of the loan. Below, you can see examples of how increasing your monthly payment can decrease your total interest and help you get debt-free sooner.
Examples of How Long It Will Take to Pay Off a $15,000 Personal Loan
| Debt | Monthly Payment | Payoff Time | Total Interest Accrued |
| $15,000 | $200 | 196 months | $24,168 |
| $15,000 | $400 | 51 months | $5,084 |
| $15,000 | $500 | 38 months | $3,731 |
| $15,000 | $1,000 | 17 months | $1,646 |
Note: Payoff timeframes assume the average APR among personal loans: 14.47%.
Questions & Answers
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21
Upvotes
What is the monthly payment on a $5,000 personal loan?
Reply
21
Rick Bormin, Personal Loans Moderator
@rhandoo2020
The monthly payment on a $5,000 loan ranges from $68 to $502, depending on the APR and how long the loan lasts. For example, if you take out a $5,000 loan for one year with an APR of 36%, your monthly payment will be $502. But if you take out a $5,000 loan for seven years with an APR of 4%, your monthly payment will be $68.
Below are the monthly payments that you can expect on a $5,000 loan with different payoff periods. The table assumes you will be paying interest at an APR of 15%, which is roughly the average personal loan APR.
Example Monthly Payments on a $5,000 Personal Loan
Payoff period | APR | Monthly payment |
1 year | 15% | $451 |
2 years | 15% | $242 |
3 years | 15% | $173 |
4 years | 15% | $139 |
5 years | 15% | $119 |
6 years | 15% | $106 |
7 years | 15% | $96 |
Almost all personal loans offer payoff periods that fall between one and seven years, so those periods serve as the minimum and maximum in our calculations. In addition, these calculations assume that if the lender has an origination fee, it's built into the APR. Some lenders charge an origination fee up front, so your monthly payments might be smaller as a result.
Once you get approved for a personal loan, you will receive information on exactly what your monthly payment will be. And you'll be able to access that information any time through your online account or by looking at one of your monthly bills.
If you'd like to try out any other combinations of payoff periods and interest rates before you apply, you can use WalletHub's free personal loan calculator.
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22
Upvotes
What is a good interest rate on a personal loan?
Reply
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Adam McCann, Financial Writer
@adam_mcan
A good interest rate on a personal loan is around 5.99%. The average APR for a two-year personal loan from a bank is 12.17%, according to the latest Federal Reserve data, and the best personal loans have APRs as low as 5.99% for the most creditworthy borrowers. The rates you get will depend heavily on your credit, income, debt, and other financial factors.
The best way to get a decent interest rate on a...
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Upvote
How can I compare personal loan rates?
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1
Adam McCann, Financial Writer
@adam_mcan
It's easy to compare personal loan rates, which is good because doing so is essential to finding the best loan offers. Personal loan rates can range all the way from 6% to 36%, and they sometimes reflect more than just interest charges. The rates advertised for personal loans are actually annual percentage rates (APRs). Technically, the difference is that APRs include both interest and fees. However, origination fees are the most common type of personal...
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What is the difference between APR and interest rate on a personal loan?
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1
Adam McCann, Financial Writer
@adam_mcan
The difference between APR and interest rate on a personal loan is that the APR includes fees while the interest rate does not. Both the interest rate and the APR measure the cost of borrowing over a year's time, and both are expressed as a percentage rate. While these terms are fundamentally different, they are often used interchangeably and can be equal in cases where the loan has no fees.
One situation where the...
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2
Upvotes
How do you lower the interest rate on a personal loan?
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2
Adam McCann, Financial Writer
@adam_mcan
The best way to lower the interest rate on a personal loan is by refinancing the loan with another lender. When you refinance, you use a new loan or line of credit with a lower interest rate to pay off the old loan, so you owe the old balance to the new lender. And since interest won't be accumulating as quickly, you should be able to pay off the new loan sooner, assuming your monthly...
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Which bank has the lowest interest rate on personal loans?
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21
Adam McCann, Financial Writer
@adam_mcan
The major bank with the lowest interest rate for a personal loan is Barclays, which advertises APRs of N/A. Other notable banks with low personal loan rates include PNC (APRs of N/A) and American Express (APRs of N/A). Also, you may find similarly low rates to some smaller banks across the country that offer personal loans.
Banks with the Lowest Interest Rates for Personal Loans
- Barclays: APRs of N/A
- PNC: APRs of...
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Upvotes
What are the best debt consolidation loan rates?
Reply
11
Adam McCann, Financial Writer
@adam_mcan
Debt consolidation loan rates usually range from 6% to 36%, depending on the lender. The best debt consolidation loan rate is 5.95%, from LightStream (a division of SunTrust Bank), with its personal loan offer. Only the most qualified applicants will receive a rate that low, but even LightStream's maximum APR is relatively low, at 17.29%.
Most lenders don't offer loans specifically for debt consolidation. Rather, they offer general personal loans that can be used...
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2
Upvotes
How do you calculate monthly payments on a loan?
Reply
Adam McCann, Financial Writer
@adam_mcan
To calculate monthly payments on a loan, use a free loan payment calculator and avoid having to do any math yourself. Just input the total amount of the loan, the number of years it will last, and the interest rate in order to see the monthly payment required. A good calculator will also show you the total amount of interest you'll pay over the life of the loan and how long it will take to repay the...
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Upvotes
What is the monthly payment on a $15,000 personal loan?
Reply
Rick Bormin, Personal Loans Moderator
@rhandoo2020
The monthly payment on a $15,000 loan ranges from $205 to $1,504, depending on the APR and how long the loan lasts. For example, if you take out a $15,000 loan for one year with an APR of 36%, your monthly payment will be $1,504. But if you take out a $15,000 loan for seven years with an APR of 4%, your monthly payment will be $205.
Almost all personal loans offer payoff periods...
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Upvotes
What is the monthly payment on a $6,000 personal loan?
Reply
Rick Bormin, Personal Loans Moderator
@rhandoo2020
The monthly payment on a $6,000 loan ranges from $82 to $603, depending on the APR and how long the loan lasts. For example, if you take out a $6,000 loan for one year with an APR of 36%, your monthly payment will be $603. But if you take out a $6,000 loan for seven years with an APR of 4%, your monthly payment will be $82.
Almost all personal loans offer payoff periods...
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