What Are the Monthly Payments on a $25,000 Personal Loan?

Borrowing $25,000 is a major financial commitment. There are times when you may need to take out such a large loan, such as if you're funding home improvement or consolidating debt. But before you do, you need to understand how much your loan will cost you.

So, what exactly are the monthly payments on a $25,000 personal loan? It depends on the interest rate that your lender charges you as well as the loan repayment term you choose. Here's what you need to know about how much you're likely to pay out of your checking account each month to your personal loan lender.

Here are the monthly payments on a $25,000 personal loan

As of May 2023, the average interest rate on a personal loan was 11.48%. If you took out a personal loan at this rate and paid it back over a decade, your monthly payments would be $351.20 per month and your total interest costs over the life of the loan would be $17,144.31.

Of course, not everyone borrows at the average rate. Some people can qualify for more affordable loans because they have excellent credit. But others may have to pay more to borrow because they don't have a great credit score or because their income is a little lower, so lenders are more nervous about default.

So, how does interest and repayment timeline actually affect your loan payments and total interest costs? Here are a few examples of what this would look like if you had different terms for your $25,000 in debt:

As you can see, your loan payment is heavily affected by both interest rates and payoff time, so you'll want to compare your options carefully. If you can shop around for rates among different personal loan lenders, you may be able to score a less expensive loan and potentially save thousands of dollars in interest over time.

What should your personal loan term be?

Your interest rate is largely determined by credit score, loan term, and income. While you can do things to change it, such as shopping around for lenders and trying to improve your credit score by picking up extra hours at work and paying down existing debt a little more, it can take time to make a big enough difference in your financial credentials to make a meaningful impact in your rates.

You can, however, have an immediate impact on your personal loan payments by choosing either a shorter or longer payoff time when you borrow. To make this decision, consider the following:

• Is it more important to be debt-free ASAP or to maintain low monthly payments? If you're worried about your payments becoming unaffordable, lower monthly payments may be the priority even if you have to pay more over the life of the loan. But if you want to keep interest costs as low as possible and becoming debt free is your major goal (even if that means temporarily sacrificing to make higher payments), a shorter payoff time makes sense.
• Would you prefer more flexibility? If you take out a loan with a longer payoff time, you always have the option to pay it off early by making extra payments (as long as your lender doesn't charge prepayment penalties). But once you've committed to a shorter payoff time, you can't just decide to make it longer if your payments become a hardship. If you'd rather have the flexibility to make payments that fit with your immediate budget, choose a loan with a longer payoff time.

By considering these issues, you can decide what type of $25,000 personal loan is right for you. No matter what you do, though, make sure you calculate the payments before you commit to borrowing so you will know exactly what obligation you're taking on in your specific situation.