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Compare personal loans| Principal | $ |
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In addition to the monthly payment, our personal loan repayment calculator also tells you how much you’ll pay back on the principal and the total interest you’ll pay. This total interest includes fees if you use your loan’s APR instead of its interest rate.
Principal. The amount that you currently owe from the money you borrow. Your loan principal is the same as your loan amount when you first take out your loan, and it decreases every time you make a payment.
Monthly payment. The amount of money you’re required to pay on your loan each month. Part of your monthly payment goes toward interest and the rest goes toward your principal.
Each lender is unique, which means that how to qualify depends on who you work with. In general, you’ll need to meet the following requirements:
If you’re looking to take out a personal loan, here are a few ways to lower your monthly payments:
The difference between a secured loan and an unsecured loan is the collateral. When a loan is backed by collateral, it is a secured loan. When a loan isn’t backed by collateral, it is an unsecured loan.
Collateral, sometimes referred to as security, is an asset of significant value that the lender can seize if the borrower fails to repay the loan. Secured loans are less risk than unsecured loans because the lender can repossess and sell the collateral in the event of a loan default. For this reason, secured loans are typically cheaper than unsecured loans in terms of interest costs.
Not necessarily. A lower monthly payment might have less of an impact on your day-to-day expenses, but it can be more expensive in the long run. Why’s that? To get a lower monthly payment, you need a longer loan term. And the longer you take to pay back a loan, the more time there is for interest to add up. This can get particularly pricey if you have a high interest rate.
If you want to lower your total loan cost, look at your budget and figure out how much you can comfortably afford to pay each month. Look for a loan that offers a monthly repayment around that amount.
Your interest rate is typically determined by your credit score and overall financial position. The lender’s eligibility requirements and risk tolerance affects the interest rate too. Before applying, it always helps to improve your financial position and boost your credit score.
The loan term is easier to negotiate with a lender than the interest rate. Normally, borrowers can request a certain term based on how much they want their monthly payment to be. However, some lenders may be more stringent about loan terms. It depends on who you finance with.
Interest rate depends on a borrower’s personal factors, especially their credit score. If you have good to excellent credit above 660 and you want to take out an unsecured loan, aim to get an interest rate between 6% and 12%. If you have bad credit below 560, you may encounter a 20% to 47% range. But credit score is just one of many factors that lenders look at, and your rate can vary depending on your overall finances. Use the personal loan calculator above to work out how much even a minor difference in the interest rate can affect the total cost of a loan.
Personal loan interest rates in Canada
Stacey has a credit score of 600. Stacey’s best friend, Martin, has a credit score of 730. Together, Stacey and Martin would like to invest in a leisure boat worth $20,000. They’ve decided to take out a $10,000 unsecured personal loan each to purchase the boat. Because Stacey and Martin have different credit scores, their loans and monthly payments look very different.
Stacey’s loan application was approved with a 30% interest rate due to her poor credit. Martin’s loan application was approved with a 10% interest rate due to his good credit. Below is a breakdown of their monthly payments and overall interest cost on a 3-, 5- and 7-year term.
| Stacey | Martin | |
|---|---|---|
| Loan amount | $10,000 | $10,000 |
| Interest rate | 30% | 10% |
| Monthly payment on 3-year term | $424.52 | $322.67 |
| Total interest paid over 3-year term | $5,282.57 | $1,616.19 |
| Monthly payment on 5-year term | $323.53 | $212.47 |
| Total interest paid over 5-year term | $9,412.04 | $2,748.23 |
| Monthly payment on a 7-year term | $285.93 | $166.01 |
| Total interest paid over 7-year term | $14,018.10 | $3,944.99 |
In general, there are two types of lenders: traditional lenders and alternative lenders. Traditional lenders include banks, credit unions and other financial institutions. These lenders typically have the strictest eligibility requirements, but they offer the best personal loan rates and terms.
Alternative lenders include financial services companies, online lenders and other non-traditional creditors. Usually, these lenders have looser eligibility requirements, but they charge higher interest rates and have less favourable terms because of the additional risk they take on.
Personal loans are simply one way to finance. Before proceeding with a personal loan, consider the below alternatives to ensure you’re making the best financing decision:
If you want to take out a personal loan, finding out how much you can afford in monthly payments is an important first step. Use our personal loan calculator to find out what combination of loan amount, loan term and interest rate is the best fit for your financial situation. You should aim to get the shortest loan term possible with monthly payments that you can still manage, because the longer the term, the more you’ll pay in interest.
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