How the payment and APR are calculated
A personal loan is usually repaid in equal monthly payments at a fixed rate. The payment comes from the standard amortization formula, applied to the balance you repay:
- M
- Monthly payment, rounded to the cent
- B
- Balance repaid: the loan amount, plus the fee if it is added
- r
- Monthly rate: interest rate ÷ 12
- n
- Number of monthly payments
An origination fee is part of the cost of credit. Under US rules, loan fees count toward the finance charge, and the APR reflects it. The calculator estimates that APR as the yearly rate at which your payments exactly repay the cash you receive. This is the actuarial approach described in Regulation Z, Appendix J.
Worked example
The defaults: a $15,000 loan at 11.5% for 36 months, with a 5% origination fee deducted from the loan.
| Origination fee5% × $15,000 | $750 |
|---|---|
| Cash you receive$15,000 − $750 | $14,250 |
| Monthly payment$15,000 at 11.5% over 36 months | $494.64 |
| Total interest | $2,807.06 |
| Total cost of borrowingInterest + fee | $3,557.06 |
| APR including the feeStated rate 11.5% | 15.09% |
Without the fee, the same loan would cost $2,807.06 and its APR would equal the 11.5% rate. The fee is paid at the start, but its effect is spread over the whole loan, so it lifts the APR to 15.09%.
Fee deducted or added to the balance
Lenders handle origination fees in one of two ways, and it changes what you actually get:
| Deducted from the loanYou receive $14,250, repay $15,000 | $494.64 / mo · $3,557.06 cost |
|---|---|
| Added to the balanceYou receive $15,000, repay $15,750 | $519.37 / mo · $3,697.41 cost |
When the fee is deducted, borrow enough to cover what you need after the fee. When it is added to the balance, you pay interest on the fee too, which makes the total cost a little higher.
How to read your results
Compare offers by APR including fees, not by interest rate alone. A loan with a lower rate and a large fee can cost more than one with a slightly higher rate and no fee. The loan comparison calculator puts up to three offers side by side.
| 24 months | $702.60 / mo · $2,612.54 total cost |
|---|---|
| 36 months | $494.64 / mo · $3,557.06 total cost |
| 60 months | $329.89 / mo · $5,543.36 total cost |
Stretching the term from 24 to 60 months lowers the payment by $372.71 but raises the total cost by $2,930.82. The rate is assumed to stay the same here; lenders often price longer terms higher.
The APR including fees assumes you keep the loan to the end. If you repay early, you still pay the whole fee but save interest, so the fee weighs more heavily.
Assumptions
- Fixed interest rate; equal monthly payments made at the end of each month.
- The rate you enter is a nominal annual rate before fees; the monthly rate is that rate ÷ 12.
- The origination fee is a percentage of the loan amount, deducted at funding or added to the balance.
- Interest is rounded to the cent each month; the final payment absorbs any rounding difference.
- The APR including fees is solved numerically and rounded to two decimals. It is an estimate, not a legal disclosure.
Limitations
- Other charges, such as late fees, optional insurance or prepayment penalties, are not included.
- Variable-rate loans and loans with irregular payments are not modeled.
- The rate you are offered depends on your credit and the lender. This calculator cannot predict it.
- Your loan agreement and the lender's official disclosure take precedence over this estimate.
Frequently asked questions
What is an origination fee?
It is a one-time charge for processing the loan, usually a percentage of the amount borrowed. Some lenders charge none. Because it is part of the cost of borrowing, it is reflected in the APR.
Why is the APR higher than my interest rate?
The interest rate covers interest only. The APR also spreads fees over the loan. With the default example, a $750 fee turns a 11.5% rate into an APR of about 15.09%.
How much should I borrow if the fee is deducted?
Divide what you need by (1 − fee rate) and round up. For example, to receive $10,000 with a 5% fee, borrow $10,527: after the $526.35 fee you receive $10,000.65. Check the result in the calculator.
Can I pay a personal loan off early?
Usually yes, but check your agreement for a prepayment penalty. The early loan payoff calculator shows how much interest extra payments save.
Sources
Definitions and rules referenced on this page. Calcendium is not affiliated with these publishers.
- Regulation Z, 12 CFR § 1026.4 — Finance charge
Consumer Financial Protection Bureau · United States · Checked October 20, 2026
Loan fees, points and service charges as part of the cost of credit.
- Regulation Z, 12 CFR § 1026.22 — Determination of annual percentage rate
Consumer Financial Protection Bureau · United States · Checked October 23, 2026
How the APR of a closed-end loan is determined, including prepaid finance charges such as origination fees.
- Regulation Z, Appendix J to Part 1026 — Annual Percentage Rate Computations for Closed-End Credit Transactions
Consumer Financial Protection Bureau · United States · Checked October 20, 2026
Actuarial method and unit periods behind APR calculations.
- Directive (EU) 2023/2225 on credit agreements for consumers
European Union (EUR-Lex) · European Union · Checked October 20, 2026
EU framework for the annual percentage rate of charge and the total cost of credit to the consumer.