Personal Loan Calculator

It uses the equated monthly installment formula: P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the amount borrowed, r is the monthly rate (the annual nominal rate divided by 12), and n is the term in months. The payment is constant for the whole term and covers that month's interest first, with the remainder repaying principal. At a 0% rate the formula degrades to the amount divided by the number of months. Monthly fees are charged on top of the installment; they do not change it.

The nominal rate is the rate used to compute interest on the balance, and it is what most offers advertise. The effective APR is the total annual cost of the loan: it folds the compounding of twelve monthly charges and every fee into one annual rate. The pair carries local names in many markets, TAN and TAEG in Italy, TIN and TAE in Spain, Sollzins and effektiver Jahreszins in Germany, but the concept is the same everywhere: the nominal rate prices the interest, the APR prices the whole loan. Even with no fees at all, the effective APR sits slightly above the nominal rate, because monthly compounding adds a little to the annual quote.

With the method the EU Consumer Credit Directive prescribes: write down the full cash-flow vector, the net amount received at signing (the loan minus upfront fees) followed by every monthly payment including recurring fees, then solve for the single monthly rate at which those flows discount to zero. That rate, annualized with compounding as (1 + i)^12 - 1, is the effective APR. The equation is solved numerically, which is also why extreme inputs, such as upfront fees as large as the loan itself, show no APR: no rate balances the flows when nothing is actually received.

More than their size suggests. A monthly charge is collected every month regardless of the shrinking balance, so its weight relative to the interest grows as the loan amortizes. On a 10,000 loan over five years at 8%, a monthly fee of 5 raises the effective APR by more than a full percentage point, roughly the same damage as a 200 one-off fee at signing. When you compare offers, a slightly higher rate with no recurring charges frequently beats a lower advertised rate that carries them; the effective APR settles the question.

The payment falls, but the cost rises: interest is charged on the balance for more months, so stretching the same amount over a longer term always increases total interest, and any monthly fees are paid more times too. A longer term is a cash-flow tool, not a saving. If the payment on the term you want feels uncomfortable, that is usually a signal to borrow less. Compare the total cost figure across terms to see exactly what the extra months cost.

It models a fixed-rate loan repaid exactly as scheduled. Variable rates, early repayment and its penalties, missed installments, taxes on the loan, and any insurance you did not enter as a fee are not included. It also does not check eligibility or apply any single country's rules: fee structures, rate caps, and disclosure requirements differ by market, so verify the numbers of your specific offer against its official information sheet before signing.