Loan Calculator
A loan quote arrives as one monthly figure, which hides the number that matters most: what the borrowing costs in total. This calculator shows both.
Formula
M = P × [ i(1+i)ⁿ ] ÷ [ (1+i)ⁿ − 1 ]
- M = monthly payment
- P = amount borrowed
- i = annual rate ÷ 12
- n = number of monthly payments
£10,000 over 5 years at 7%: £198 a month, £1,881 total interest
How Repayments Are Calculated
Lenders use the amortisation formula:
M = P × [ r(1 + r)n ] ÷ [ (1 + r)n − 1 ]
Where P is the amount borrowed, r the monthly rate (annual ÷ 12) and n the number of monthly payments.
£15,000 over five years at 7.9% works out at £303.43 a month, with £3,206 of interest over the term.
Beware the Flat Rate
Some agreements, particularly in car finance, advertise a flat rate: interest charged on the original amount for the whole term, ignoring the fact that you are steadily paying it down.
A flat rate looks roughly half as expensive as the equivalent APR. Always compare deals on APR, which includes compulsory fees and reflects the falling balance. If a rate looks unusually low, check which one is being quoted.
What Changes the Total
- Term. Stretching repayment lowers the monthly figure and raises the total interest, often sharply.
- Rate. Advertised APRs are "representative" — lenders only have to offer them to 51% of accepted applicants, so your actual rate may be higher.
- Early settlement. UK consumer credit rules let you repay early, though up to 58 days of interest may be charged.
Quick Reference
| Term | At 5% | At 7% | At 10% |
|---|---|---|---|
| 2 years | £529 | £745 | £1,075 |
| 3 years | £790 | £1,116 | £1,616 |
| 5 years | £1,323 | £1,881 | £2,748 |
| 7 years | £1,872 | £2,678 | £3,945 |
Frequently Asked Questions
- What is the difference between APR and interest rate?
- APR includes compulsory fees as well as interest, and reflects the reducing balance. It is the figure that lets you compare two offers on equal terms.
- Does a longer term cost more?
- Almost always. The monthly payment falls but you pay interest for longer, so the total rises. Use the calculator to price both before choosing.
- Why is my quoted rate higher than advertised?
- Advertised APRs are representative: only 51 per cent of accepted applicants need to be offered them. Your rate depends on your credit profile.
- Can I pay a loan off early?
- Yes, under UK consumer credit rules, though lenders may charge up to 58 days of interest as an early settlement fee. Ask for a settlement figure in writing.