Loan repayment calculator

How loan repayments are worked out

Most personal and car loans are repaid in equal monthly instalments. Each payment covers that month’s interest on what you still owe, and the rest reduces the balance. The calculator uses the standard amortising-loan formula, with the monthly rate taken as the yearly rate divided by 12.

Example: borrowing 15,000 at 7.9% over 5 years (60 payments) costs 303.43 a month, and you repay 3,205.71 in interest on top of the 15,000.

Shorter or longer term?

15,000 at 7.9% over	Monthly	Total interest
3 years	469.35	1,896.74
5 years	303.43	3,205.71
7 years	233.05	4,575.91

Spreading the loan from 3 to 7 years halves the monthly payment but more than doubles the interest. If you can afford the higher payment, the shorter term is cheaper.

APR and the rate you are offered

APR (annual percentage rate) includes the interest plus compulsory fees, so it is the fairest number for comparing loans. In the UK and EU the advertised “representative APR” only has to be offered to a share of applicants (51% in the UK), so the rate you are actually offered can be higher. In the US, look at the APR on the loan estimate. Enter the rate you were offered, not the advertised one, for a realistic figure.

Paying off early

Paying extra reduces the balance that interest is charged on, so it saves money. Some lenders charge an early repayment fee; for most regulated personal loans in the UK it is capped at 1% of the amount repaid early, or 0.5% if less than a year of the loan is left. Check your agreement before overpaying.

What this calculator doesn’t include

Arrangement fees added to the loan, payment protection insurance, balloon payments (common on car finance such as PCP) and variable rates. Islamic personal finance in the UAE and Saudi Arabia uses a profit rate; enter it as the interest rate and the monthly figure works the same way.