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Need a 10,000 Dollar Personal Loan? – Let’s Do The Math

2017 Update: Know the law and protect yourself from predatory lenders. Learn how to avoid scams.

It seems to me that if you need a personal loan for 10,000 dollars you could find ways of borrowing the money in such a way that it doesn’t burden you with extremely high interest.

You might want to consider getting legitimate debt relief company working for you before borrowing any more money.

We have our favorites as far as normal installment lenders go, but we’ll get into that later – right now we want to fill you in on the nerdy details a bit. You are better off applying for loans after you fully understand how APR works.

You want to try and find the lenders who are not acting in a predatory manner, and BELIEVE ME, we have to keep our eyes peeled if we want to find lenders that aren’t trying to line their pockets with the business of rubes.

One of the ways you can keep your APR limited, is to ensure your credit rating is solid and expansive. I’ll explain the expansion of your credit in a moment, but first let talk about borrowing 10000 dollars when you have a bad credit rating.

If you have a FICO score that is under 700 you will be penalized with a high APR (and sometimes more expensive closing fees) so let us say for this scenario, you have a FICO score of 700. The lending terms on ten thousand dollars is as follows. Please keep in mind that I’m only using the loan calculator I have at the bottom of this page. (handy for quick calculations for any loan amount).

$10,000 Loan With a FICO of 700  – APR 11%

FICO = 700
Loan = $10,000
APR = 11%
Term = 5 Years
Monthly Installments
————————————————————————
Interest per year on average = $559.062
x 5 years interest = $2795.31
Total gross amount to pay back the lender = $12795.31
Monthly Installment Payment = $210.33

You can see in this first example how much you are punished for having a bad credit rating. Over  the five year term you are almost paying back the entire loan in half again. In this case the $5,500 is a steep payment to make over 5 years. This is how banks make their money and this is how you loss your money. For our 10,000 dollar loan amount used in this example you can really see how a high interest rate can result in a serious windfall for the bank or lender. This is a prime reason why, if you can, you want to borrow the money from a family member or friend with no interest.

For the next example we’ll use a borrowing and lending scenario where the borrower has an excellent credit rating and relationship with the bank. Their current FICO score is a whopping 770 – which most consumers will never have in their lifetime. For a credit score that good you need be a business owner or merchant that has carried substantial credit lines in the past – and has done so for many years.

$10,000 Loan With a FICO of 770 – APR 3%

FICO = 770
Loan = $10,000
APR = 3%
Term = 5 Years
Monthly Installments
————————————————————————
Interest per year on average = $152.472
x 5 years interest = $762.36
Total gross amount to pay back the lender = $10762.36
Monthly Installment Payment = $176.92

As you can see, this borrower gets a much better deal. It’s all based on risk assessment by the lender – in this case the bank. In this case it is most likely that the borrower will have some sort of LOC (line of credit) that is very close to prime, and sometimes lower than prime. This kind of borrower would likely never go to the bank for a relatively small $10,000 dollar loan. These borrowers would simply withdraw the 10,000 dollars from their LOC account and pay it all back in due time. To have a guaranteed LOC account you almost always have to have some sort of collateral in the form of equity. The $10,000 is completely secured by your equity as wrapped up in your LOC.

For the 3rd example we’ll use a credit score of 600 which many consumers and borrowers have these days. The calculation of numbers really explodes in these worse case examples, so hang to your hat – this is going to get ugly.

$10,000 Loan With a FICO of 600 – APR 17%

FICO = 600
Loan = $10,000
APR = 17%
Term = 5 Years
Monthly Installments
————————————————————————
Loan Calculation Results at 17%
Total Amount to be payed: $14,320.02
Total amount of interest $4,320.02
Payments by monthly installment: $235.40

As you can see in this example the borrower is paying almost half as much back in interest over the principal loan. If you need a $10,000 loan you had best be doing it another way if you have a really bad credit score as demonstrated here.

Reference: Picture of $10,000 bill found on Pennylicious