How Much Do Personal Loans Cost?

4/12/22 Brian Cedeno

Sometimes people need an extra boost of cash to get things going in their life. Whether we’re trying to consolidate credit card debt, refinance your car with better loan terms, or pay off a wedding with the maximum loan amount available, finding the right personal loan lender to give us that cash can be a challenge.

After all, borrowing any cash is always a risky experience, since failing to repay the loan can lead to a negative experience for your personal finances. You’ll want to find a trustworthy, reputable lender who offers reasonable fees and interest rates, as well as user-friendly services.

While you may feel at a disadvantage in taking out a loan, it is important to remember that getting a loan means you’ll be walking down a two-lane path. In other words, you’ll be forming a deep relationship with your lender who knows you and your needs. But before you decide on which lender looks the shiniest out of the hundreds available nationwide, you should be very selective in who you decide to partner with as all lenders may vary in shape and size.

If you are considering applying for a personal loan, it’s essential to know what to expect from a personal loan. But how do you determine what is a good interest rate? What other fees should you expect to pay for a loan? And how much can you borrow from a personal loan lender?

In this guide, we answer those questions, learning more about the personal loan interest rates available to borrowers, discovering the inner workings of comparing interest rate offers, and what you can do to leverage your personal loan.

Table of Contents

  • What am I paying for a personal loan?
    • Personal loan interest rates
    • Additional fees and charges
    • Prepayment fees
    • Late payments
  • How to choose a personal loan lender
    • Financial security
      • Increase your credit score
      • Lower your debt-to-income ratio
    • Payment options
      • How to save money on a personal loan
      • Clean up your credit history
  • Are personal loans right for me?



Costs of a Personal Loan: Rate and Fees

If you’ve never applied for a personal loan before, it can be difficult to know how much cash you’ll need to give up before you actually get a personal loan. Your lender should make it clear as to what you’re agreeing to.

Luckily, there are only a few charges to know about for personal loans: interest rates, origination fees, application fees, and late payment fees are some charges you can expect to see during the loan application process.

Interest rates

Obviously, low-interest rates are typically a goal in any personal loan application. However, the starting interest rate is only one factor. For a personal loan, there are two types of fixed interest rate fees to know about:

  • Interest rate: the annual cost of a loan to a borrower expressed as a percentage
  • Annual percentage rate (APR): the annual cost of a loan to a borrower, including associated fees, expressed as a percentage.

Like an interest rate, the APR is also expressed as a percentage. However, an APR percentage includes other fees such as insurance, discount points, and origination fees.

It’s essential to understand if you have a fixed-rate loan or variable APR loan since, with a variable APR, could have you end up paying more in interest over the course of the loan. Based on your credit score, you’ll be able to compare personal loan rates offered by a lender (and could see favorable options if you have good or excellent credit).

Associated fees

Since the interest on a loan is generally expressed as the primary fee, what’s important to know is that many personal loan lenders may charge secondary processing fees for a loan.

  • Underwriting Fees: Origination fees are costs of the underwriting process for a personal loan, which can be a flat-rate fee or a percentage of the loan amount. Particularly, if it’s been determined as a percentage, the origination fee can end up being quite high depending on your lender.
  • Application Fee: An application fee is charged to the borrower for the processing of the personal loan application. This isn’t a common fee for most personal loan lenders, but some agencies still charge this to borrowers. Research your options for a loan and find lenders that do not charge an application fee, such as online lenders that have fast and simple online applications.
  • Credit Insurance: Credit insurance is an optional loan fee that you can buy when you take out a loan. Depending on the type of credit insurance, the policy may cover personal loan payments or the ability to repay the outstanding balance, in the event that you become disabled or you lose your job.

Prepayment penalty

If you end up paying off your loan earlier than what was agreed upon in your loan contract, you may end up facing early payoff fees. Most personal loans come with a specified loan term, which is the amount of time you have to completely repay the loan and the included interest. Loan repayment terms can typically range anywhere from 6 months to 72 months, but each lender has their own requirements for repayment.

If you pay more than the amount that is due each month, you’ll end up paying off the loan before your loan term is completed, and you’ll likely be charged a prepayment penalty. However, the actual cost of a prepayment penalty will vary depending on how your lender charges for an early payoff fee; the fee can be a percentage of your loan balance, the amount of interest your lender may have missed since you repaid your loan early, or as a fixed fee. Because of this, a prepayment penalty can cost borrowers a few hundred bucks to a few thousand dollars, depending on how much they borrowed and how the fee is charged.

Late payment penalty

Missing a payment on a personal loan is similar to missing a payment on a credit card: you may end up paying more on your existing credit card debt due to the penalty applied by your interest rate. However, missing a payment on a personal loan can have deeper effects.

While personal loan lenders may charge late fees up to $50 per late payment, the penalty amount for the late payment is ultimately restricted to the rules outlined by your lender. Also, depending on the terms of your loan agreement, if you miss your monthly payment by at least 30 days, you may start drifting into loan default. From there, the lender is within their right to report your late payment to major credit bureaus. This action can erase up to 100 points off of your credit score and can stay on your credit report for up to seven years, making it harder to qualify for loans in the future.

Before you try to get loan approval…

Even before start going online to look for personal loans, it’s critical to have a strong sense of your financial profile as a borrower. That’s why having a strong credit history with a fair credit score allows you backstage access to the best deals available for personal loans. Understanding your responsibilities — and your obligations — as a borrower is essential to establishing a manageable repayment plan for personal loans.

In terms of your loan, you should know when you must start paying it back, what your full loan term will be, and how much you will have to pay on a month-to-month basis. It’s also important to understand how long it will take to receive funding. This means thoroughly understanding your credit score, and what types of personal loans your credit score will allow you to apply for. Having all of this information will make getting a personal loan a smooth process.



Two Ways You Can Use to Pick A Personal Loan Lender

Now that you’ve applied to different lenders, you’re probably receiving different loan offerings that include varied interest rates, loan amounts, and monthly payment options based on your credit score.

From here, you’ll need to compare your choices for each lender. There are a few methods you can use to quickly determine if a lender is a right choice for you, regardless they’re a traditional finance enterprise (such as a corporate bank or a credit union) or a modern financial organization (online lender, non-banking lender).

Pick trustworthy financial institutions

You’ll want to verify if the lender you want to choose for your loan is a legitimate company. Here are a few ways to tell if a lender that offers personal loans is a scam:

  • State Registration: Loan agencies are required by federal law to register their business in the state they intend to conduct business in or offer loan products through. If a lender is not registered in your state of residence, then they’re conducting business illegally and are not reputable.
  • Credit History: Most lenders need to verify if you have existing debt and a history of paying your bills on time in order to offer a loan product, regardless if you have good or bad credit. Suspicious businesses won’t be interested in anything relating to your credit score before you submit an application; instead, they’ll be more interested in sensitive personal information, such as your social security or bank account credentials.
  • Prepaid Cards: Fraudulent agencies may ask for prepaid debit or gift cards from borrowers, claiming that they need them for insurance, collateral, or fees. Legitimate financial institutions may charge a fee during the application or loan funding process, but those are usually charged through a wire transfer, a direct deposit, or a check from your bank account to the institution.
  • Company Address: No matter who you apply to for a personal loan, the lender must provide a physical location per federal law. Scam companies may provide addresses that do not exist at all or fake addresses to empty parking lots. Avoid lenders that neglect to provide a physical address or verify that the address is legitimate.
  • Rushed Process: A good personal loan lender typically asks for information about you before offering a loan, such as your employment background and previous financial history. By federal law, personal loan lenders are allowed to give you 28 calendar days to review a personal loan offer before accepting loan funds. Fraudulent lenders will try to rush you with immediate deadlines, which is illegal and not legitimate for verified lenders.

Find user-friendly payment options

It’s very helpful to have a lender that understands their customers and cares about their financial future. Some lenders offer a user-friendly platform that allows you to easily view and manage your loan, while some lenders can automate monthly payments for you so you don’t accrue late fees.

Here’s a shortlist of what a personal loan lender may offer in regards to payment options:

  • Online Direct Payment
  • Automated Payments
  • Paying Off Loan Amount by Phone
  • Paying Off Loan Amount by Mail

Check with your lender on which methods they offer and which method of payment is the most efficient for their payment system.

The frequency of monthly payments may vary per the loan terms outlined in your agreement. Here are a few ways borrowers can repay their loans over time:

  • Bi-Weekly Payments
  • Monthly Payments

Ensuring you can neatly manage your account online — as well as institute automatic payments, if desired — is very helpful when managing a personal loan.



Learn More About Personal Loans Today

Are you looking for a personal loan with a low-interest rate?  LoanMe provides unsecured loans with competitive repayment terms to well-qualified customers.

The process of getting a loan can be confusing and stressful, but it doesn’t need to be. Multiple lenders (such as LoanMe) offer personal loans specifically designed for those who need them, and our approval process requires fewer documents than other traditional loan programs. Our loan application is simple, and you can have your money in as little as one business day.

With LoanMe offering same-day funding, applying for a personal loan is an easy process. If you feel that LoanMe is the lender you need, then we’d be happy to help you find the right financing options and support you through the entire loan process.

Learn how LoanMe may be able to help you and see if you pre-qualify for a personal loan today. Happy hunting and good luck!



This article has been prepared for general information purposes only. The information presented is not legal, financial, tax, or accounting advice, is not to be acted on as such, and is subject to change without notice. Credit approval is subject to LoanMe’s credit standards, and actual terms (including actual loan amount) may vary by applicant. LoanMe requires certain supporting documentation with each new application. If you have any questions regarding this, call us at 844-311–2274. California loans are made pursuant to LoanMe’s California Department of Business Oversight Finance Lenders Law License #603K061. LoanMe also offers loans in certain other states which may have higher minimum loan amounts. Wires are sent out by 5:30 pm EST Monday-Friday. The funds should appear in your account shortly thereafter, however, this is subject to your bank’s policy and procedures with receiving incoming wires. Copyright © 2022 LoanMe, Inc. All rights reserved. 

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