The One-Year Personal Loan

What 12 months costs at common amounts

The table gives the monthly payment and, in brackets, the total interest over one year. It assumes a fixed rate, equal monthly payments and no fees. The 28% column matches the most a federal credit union may charge on a payday alternative loan while the NCUA's 18% general ceiling stands; PALs are covered below.

Over one year the rate matters less than you might expect. On $2,000, going from 15% to 28% APR adds about $12 a month and $150 in total. The amount is what drives the payment: each $1,000 adds roughly $90 a month at 15%. Try your own figures in the payment by loan size calculator.

12 months against shorter and longer terms

Here is $3,000 at 15% APR at four lengths, with the rate held equal so only the term changes.

Moving from 12 to 24 months lowers the payment by about $125 and costs about $242 more. Moving to 36 months saves another $41 a month and adds another $253. Halving the term to six months nearly doubles the payment to save about $117. The loan term comparison shows the same trade for your own amount.

One ring, quarter by quarter

A one-year loan grows a single ring, so it is more useful to look inside it. Each quarter you pay about $812 on the $3,000 example. Interest takes 12.8% of that in the first quarter and 2.4% in the last.

Because the balance falls fast, a short loan leaves little interest to save by refinancing, and an extra payment in the first months does the most good.

When a short loan beats a credit card

Commercial banks charged an average 22.36% APR on credit card accounts that paid interest in the third quarter of 2026, according to the Federal Reserve's G.19 release published November 6, 2026. If you clear $3,000 at that rate in 12 equal monthly payments, the interest comes to about $376; a 12-month loan at 15% costs $249.30. That is roughly $126 saved, and the loan ends on a fixed date. The card figure is approximate: cards charge interest on daily balances.

• The loan wins when you need most of a year to pay, the loan APR is clearly below your card rate, and there is no origination fee or only a small one. A 5% fee on $3,000 is $150, more than the $126 difference.
• The card wins when you can pay the balance within two or three months. Paying $3,000 at 22.36% over three months costs about $112 in interest, less than the 12-month loan.
• Neither helps if you will keep using the card after you move the balance.

TrustCedar compares the two in more depth in personal loan vs. credit card.

Small loans and credit union PALs

Many lenders set a minimum amount, and some keep their shortest terms for small loans. At the small end, federal credit unions offer payday alternative loans (PALs) under 12 CFR 701.21. The rate may be up to 1,000 basis points above the general ceiling the NCUA Board sets, which is 28% while the 18% ceiling stays in place (extended through September 10, 2027). The application fee is capped at $20.

A credit union may make no more than three PALs to one borrower in any rolling six months. On $1,000 at 28%, six months costs $180.54 a month and about $83 in interest; 12 months costs $96.51 a month and about $158. Lendmira lists other payday loan alternatives.

When one year is the right length

• The amount is small. On $1,000 to $3,000, the payment stays within reach for many budgets, and the interest saved over longer terms is a real share of the loan.
• You have a known cash flow. A tax refund, a bonus or seasonal work can cover the payments within the year.
• You want the debt gone before the next big expense. One ring, then it is closed.

It is a poor fit when the payment would leave nothing for a bad month. A missed payment costs more than the interest a 12-month term saves. Pick the amount first with how much to borrow, then the term; if the 12-month payment is tight, a 24-month loan paid down faster when you can keeps your options open.

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