calculate-loan

01 Loan payments

Personal Loan Debt Payoff Calculator and Guide

Calculator No. 01-3863 · Updated · Formula and assumptions shown below

Monthly payment $405.53
Total interest
$4,331.67
= Monthly payment × loan term × 12 − loan amount
Loan amount
$20,000
Input
Interest rate (APR)
8 %
Input
You enter
Loan amount ($), Interest rate (APR) (%), Loan term (years)
You get
Monthly payment ($), Total interest ($)
Rounding
2 dp

Estimate for education, not financial advice. The result follows from the numbers you enter and the formula shown. It is not a quote or an offer, and it does not include fees, taxes or insurance unless the calculator asks for them. Ask your lender for the exact figures.

A personal loan can pay off debt by replacing one or more balances with a new installment loan, but whether that lowers total cost depends on the loan’s APR, fees, repayment term, and the debts being repaid. This calculator estimates the monthly payment and total interest on a fixed-rate personal loan; enter the amount, APR, and term to see the results.

Formula

The calculator treats the loan as a fixed-rate balance repaid with equal monthly payments. The monthly payment formula is:

Payment = P × r / [1 − (1 + r)−n]

  • P is the amount borrowed, in dollars.
  • r is the monthly interest rate, calculated as APR ÷ 1,200. APR is entered as a percentage per year.
  • n is the number of monthly payments, calculated as years × 12.

Total interest is estimated as monthly payment × number of payments − loan amount. The calculator’s payment and interest outputs are displayed to cents. For an exact repayment schedule, a lender’s rounding and payment-date practices can affect the final installment.

Worked Example

Using the defaults—$20,000 borrowed, 8% APR, and a five-year term—the monthly rate is 0.08 ÷ 12 = 0.0066667, and the term is 5 × 12 = 60 payments.

Payment = 20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)−60] = $405.53 per month, rounded to cents.

Total interest = $405.53 × 60 − $20,000 = $4,331.80. This is an estimate using the displayed rounded monthly payment. Actual loan documents may use different rounding or payment details.

How a Personal Loan Pays Off Debt

With debt consolidation, a borrower takes out a new personal loan and uses its proceeds to pay existing debts, such as credit-card balances or other loans. The old accounts do not disappear automatically: the balances must be paid, and the borrower remains responsible for confirming that each payoff is completed. A personal loan commonly has a set repayment schedule, unlike a revolving credit account, where the balance can change as charges and payments occur.

Consolidating balances changes how the debt is structured; it does not erase what is owed. The new loan may make payments more predictable, but the total cost depends on the amount financed, APR, term, fees, and whether the borrower continues using the paid-off credit accounts.

Compare the Full Cost, Not Just the Payment

A lower monthly payment alone does not prove that a loan saves money. Extending repayment can reduce each scheduled payment while increasing the number of months interest accrues. Compare the new loan’s total of payments and any fees with the remaining cost of the debts being replaced. For an apples-to-apples comparison, use the same payoff horizon and include all required charges that apply.

For example, suppose $10,000 of existing debt is repaid over a shorter period, while a new loan spreads the same principal over a longer period. The longer loan could have a smaller monthly payment yet accumulate more interest overall. The calculator estimates interest from the APR and term, but it does not determine whether a proposed loan is cheaper than a particular set of existing accounts. That comparison requires their current balances, rates, payment schedules, and any applicable charges.

What to Check Before Using a Loan for Payoff

  • Loan amount: Check whether the amount covers the intended payoffs and whether any fees are deducted from the proceeds or added to the balance.
  • APR and fees: Use the lender’s disclosed APR and fee information. Do not treat an advertised or illustrative rate as a personalized offer.
  • Term and total payments: Review both the scheduled payment and the total amount due across the full term.
  • Payoff logistics: Confirm payment instructions, timing, and the final balance for every debt being paid. Interest may continue to accrue until a creditor receives and processes payment.
  • Account use afterward: If paid-down credit accounts are used for new purchases, the borrower could end up with the personal-loan payment plus new balances.

Common Problems and Calculator Limits

The calculation assumes a fixed APR, equal monthly payments, and a loan fully repaid over the entered term. It does not include origination charges, late fees, optional products, taxes, payment-date differences, or changing rates. It also does not model the interest or minimum-payment rules of credit cards and other debts, nor does it account for a payoff amount that differs from the displayed balance.

One common misconception is that consolidating debt automatically improves a credit score or guarantees savings. Neither outcome can be concluded from this payment calculation. Credit reporting and a borrower’s financial circumstances involve information outside the formula. Likewise, approval, offered terms, and eligibility cannot be inferred from the calculator; obtain the actual terms and disclosures directly from the lender.

Frequently Asked Questions

Can a personal loan pay off credit-card debt?
Yes. Loan proceeds can be used to pay credit-card balances, subject to the loan’s terms and any restrictions the lender sets. Confirm that each card issuer receives enough to bring the intended balance to zero.

Will a personal loan reduce the amount I owe?
No. It generally replaces existing debt with a new loan; it does not forgive the principal. Interest and fees determine how much is repaid in total.

Does a lower monthly payment mean I will pay less?
Not necessarily. A longer term can lower the payment while increasing total interest. Compare the full repayment amounts and applicable fees, not only the monthly figure.

Should I close credit cards after paying them off?
This calculator cannot determine that. Account decisions can have effects beyond loan arithmetic, and the relevant terms and individual circumstances vary. Review account information and seek qualified guidance if needed.

What APR should I enter?
Enter the APR stated in the offer or disclosure you are evaluating, not an assumed market rate. If fees or terms are unclear, ask the lender for the relevant written figures.

Assumptions

  • The APR is fixed for the full repayment term.
  • Payments are equal monthly installments, with the first payment one month after borrowing.
  • Interest compounds monthly at APR divided by 12.
  • Fees, taxes, insurance, PMI, escrow, and charges on the debts being repaid are not included.

This result is an estimate; the lender’s disclosure gives the exact figures.

Related

Formula used
in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2

Each line is one input (in, sel, list) or one result (out: label, unit, formula, decimals). How the calculators work

Method: the standard loan formula for this calculation, fixed rate and monthly compounding unless stated, rounded as each result states. Not financial advice; no lender, rate or product is recommended. See formulas and assumptions, the disclaimer or report an error.

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