See how much loan you can afford and how extra payments can help you save.
Getting a loan at the right interest rate with the right term can affect how easy (or difficult) it is to pay a loan back. Rates and terms affect how much you pay each month, as well as the total cost of borrowing. This loan calculator can help you find the right loan to fit your needs and budget. It also helps you assess how extra payments or larger payments can help you save money.
Choosing the right term on a loan
A term is the length of time you have to repay a loan.
- Choosing a shorter term increases the monthly payment requirement but decreases total costs. A shorter term helps you save money overall.
- Choosing a longer term decreases the monthly payment requirement but increases total costs. A longer term will make a loan more affordable.
Lenders offer different terms on different types of loans. So, while 30 years is a standard term for a mortgage, it’s unlikely that you’ll find a personal loan or auto loan with that long of a term.
|Type of Loan||Common Terms|
|Mortgage||30 years is the most common, but you can you can also get terms of 10, 15 and 20 years.|
|Auto loans||72 months is currently the most common term, although terms have been getting longer; some lenders offer 84-month terms.|
|Personal loans||Most lenders cap personal loans at 48 months, although some lenders offer personal loans up to 60 months.|
|Student loans||Federal student loans and most private loans have a term of 10 years (120 months); some private loans will offer longer terms of up to 25 years to give you more time to pay the balance off.|
Tip: Always choose the shortest term you can afford to pay
Increasing the term of the loan just to make the payments lower only makes sense to a point. You want to make sure you can afford the monthly payments without stressing your budget. However, extending the term further than that just to drop the payments even more isn’t a good long-term financial strategy. Paying off a loan as quickly as possible will minimize the total cost, so you save money overall.
Getting the right interest rate
When it comes to the interest rate applied to your loan, lower is always better. Lenders assign interest rates for loans based on your credit score. A higher credit score means you enjoy lower interest rates. Lower rates reduce both the monthly cost and total cost of your loan. So, getting a lower rate is a win-win.
Different types of loans have different average rates. Mortgages tend to have the lowest rates, but even a 1% difference in the rate on such a large loan can equate to thousands of dollars difference in the cost of the loan.
|Type of Loan||Average rates|
|Mortgage||Mortgage rates tend to average between 3% and 5%.|
|Auto loans||Auto loans tend to average from 3% to 10%.|
|Personal loans||Rates on unsecured personal loans average between 5% and 36%.|
|Student loans||Federal student loan rates sit at 4.5% on undergraduate loans and just over 7% for graduate and PLUS loans for parents; private loans range from 4% to 13%.|
Federal student loan interest rates are not based on your credit
Unlike other loans, you don’t qualify for a better federal student loan interest rate if you have excellent credit. Rates for federal loans are set each year in the summer, usually on July 1. They get set based on the 10-year Treasury Note Index.
This can be both good and bad. If you don’t have good credit or haven’t started building credit yet, then this allows you to qualify for a decent rate that you might not get otherwise. But if you have excellent credit, you might qualify for a lower rate with a private loan. Just be aware that private loans aren’t eligible for any federal repayment plans or forgiveness programs.
Adjustable-rate loans may offer better rates now but be careful!
Not all loans have fixed interest rates. Adjustable-rate loans have rates that can change over time, usually after a set number of years. For example, the rates on an adjustable-rate mortgage usually adjust every 1, 7 or 10 years.
ARMs can help you get lower rates, especially when rates are low like they are now. When the Federal Reserve lowers the benchmark federal funds rate, rates on all types of loans (besides federal student loans) tend to go down. However, if rates go up again, then your adjustable-rate loan may become less and less beneficial. You could end up with higher rates than if you’d just take the fixed rate at the beginning of your loan.
When rates are low, consider refinancing to a low fixed rate
Paying attention to what’s happening with interest rates can be beneficial, because you can refinance loans to secure a lower fixed rate. Mortgages and auto loans can both be refinanced. Personal loans can be refinanced as well, and you can even use a debt consolidation loan to consolidate them with high interest rate credit card debt.
Even student loans can be refinanced, but only through a private lender. You can’t refinance federal loans to get a lower interest rate. You must convert the debt to private, which again, makes you ineligible for any federal relief options.