How Much Does a $5,000 Loan Cost Per Month?

When you make a loan payment, the lender applies each monthly payment to the loan principal, accrued interest and, if applicable, any fees. The principal is the amount borrowed. The interest is the cost paid for borrowing the principal.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

A lender structures the loan and bases the monthly payments on the following:

• The principal

• The loan's annual percentage rate (interest)

• The length of the loan, also called the loan term

You can use these same factors to estimate monthly loan payments before borrowing to determine if you can afford a personal loan.

How Much Would a $5,000 Loan Cost Per Month?

According to the most recent data from the Federal Reserve, the average commercial bank personal loan APR for a 24-month term is 11.14%. The monthly payment would be about $233.36.

However, your APR could be lower or considerably higher, or your loan term could be longer. Your loan structure -- from the amount you can borrow to the APR to the length of the loan -- is determined by the lender based on your credit score, along with several other factors, including your income and current debt obligations. So, knowing how the loan APR and term will affect the monthly payment is helpful.

The following tables can give you an idea of how much your monthly payment would be on a $5,000 loan for different loan APRs and terms.

How APR Affects the Monthly Payment

This table compares monthly payments on a $5,000 24-month loan at different APRs. Generally, the better your credit score, the lower the APR you will receive. If you have a fair to low credit score, you can expect a higher APR and a higher monthly payment.

How The Loan Term Affects The Monthly Payment

The examples in this table all have the same APR, but the term differs for each. It's easy to see that the longer the loan term, the lower the monthly payment. However, a longer loan term means a longer time for interest to accrue.

How Do You Calculate Monthly Payments on a Loan?

Most lenders use the following formula for calculating fixed-interest monthly loan payments:

• Monthly payment = P ((R (1+R)^N) / ((1+R)^N-1)

In this equation:

• "P" represents the loan principal

• "R" is the annual rate

• "N" is the loan term

You can plug various loan amounts, terms and annual rates into the equation and do the math. However, the easiest way to calculate a personal loan payment is to use an online loan calculators. Many allow you to input any loan amount, APR and term.

Other Personal Loan Costs To Consider

Personal loans may come with other fees that can increase the cost of borrowing. Lenders charge hefty late fees if you fail to make on-time payments. Some may charge a prepayment penalty, which is something to watch for if you hope to pay off your loan early.

Perhaps the most costly fee some lenders charge is an origination fee for loan processing. An origination fee might be a flat fee or a percentage of the borrowed amount. Usually, the origination fee is deducted from the principal before the loan funds are dispersed to you.

Photo credit: kate_sept2004 / Getty Images

Sources:

Finance Rate on Personal Loans at Commercial Banks, 24 Month Loan. https://fred.stlouisfed.org/series/TERMCBPER24NS