There are three parts to a 10000 personal loan. These are interest rate, loan amount and monthly payment. Of these three one will be more important to a borrower than the other two. Maybe a borrower needs lowest payment possible for the longest period of time or a borrower may want the lowest interest because they know they will pay the loan back quickly. Only by carefully analyzing the different loan offers will each borrower be able to take the best offer for them.
The interest rate is the cost of getting the money and is given as a percentage. A 10% interest rate on $10000 loan for one year would cost a thousand dollars. At the end of the year the amount owed to the lender is $11000.
The loan amount is the amount this borrower is paying interest on. If this borrower has to pay five points (5%) to borrow the money, the borrower would get $10000 in cash, but the loan would be $10500. Points are paid to the lender to make a loan. Also any upfront fees that the borrower has to pay are to be considered in this. If the borrower has to pay $50 for a credit report than that loan on top of a 5% for the five points would be $11050. This means borrowers would be paying interest on $11050 instead of $10000.
The payments will be lower if the repayment period is ten years instead of five years.
By comparing these items borrowers will understand the different costs. By multiplying the monthly payments by the number of payments, they will discover the full cost of the money. This can be done for any amount of loan, even a loan for 50000.
An informed borrower makes better decisions about their financial future. By comparing the different loans and options offered by different lenders, the customer will find the best one for his current situation.