What the loan calculator shows

The calculator provides three main results:

• Monthly repayment: The estimated regular payment towards your loan.
• Total repayment: The total of the monthly repayments over the selected term.
• Total interest: The estimated interest paid in addition to the amount borrowed.

These results provide a starting point for comparing loan scenarios. For a month-by-month breakdown of interest, capital repayments and the outstanding balance, use the Amortization Calculator.

Understanding the main loan figures

Loan amount or principal

The principal is the amount borrowed or financed. Interest is calculated on the outstanding balance as you repay the loan.

For example, if you borrow £12,000 towards a car purchase, your starting principal is £12,000. If you pay part of the purchase price yourself, enter only the amount financed.

Annual interest rate

The annual interest rate describes the rate charged on your borrowing. With the same principal and repayment term, a higher interest rate increases the monthly repayment and total interest.

This calculator converts the entered annual interest rate into a monthly rate by dividing it by 100 and then by 12. It assumes the rate remains unchanged throughout the loan term.

Loan term

The loan term is the period allowed for repayment. Enter it in years; the calculator converts this into monthly payments.

A longer repayment term generally lowers the monthly payment but increases total interest when the borrowing amount and interest rate stay the same. A shorter term usually means higher monthly repayments and a lower overall interest cost.

Total repayment and total borrowing cost

Total repayment is the amount borrowed plus the interest calculated over the term.

However, your actual total borrowing cost may also include arrangement fees, broker fees or other charges. These are not automatically included in this calculator.

Interest rate versus APR

The interest rate and annual percentage rate (APR) are related but are not interchangeable.

APR expresses the annual cost of borrowing using interest and applicable charges, making it useful when comparing loan offers. The advertised interest rate alone may not reflect those additional costs.

This calculator uses a simple annual-interest-rate-to-monthly-rate conversion. It does not calculate a regulated APR or separately model fees. Use the contractual annual interest rate where available. Entering an advertised APR may give an approximate comparison, but it will not necessarily reproduce a lender’s quoted repayment.

For savings, UK providers commonly use annual equivalent rate (AER). You may also encounter annual percentage yield (APY) in overseas material. These describe savings returns and should not be substituted for a loan’s interest rate.

How to use the loan calculator

1. Choose your currency. Select the currency used for your loan and keep all amounts in that currency.
2. Enter the loan amount. Use the principal you intend to borrow or finance.
3. Enter the annual interest rate. Provide the yearly percentage rate, rather than a monthly rate.
4. Enter the loan term. Specify the repayment period in years.
5. Click Calculate. Review the estimated monthly repayment, total repayment and total interest.
6. Compare another scenario. Change the loan amount, interest rate or term to see how the results differ.

Review both the monthly payment and the total interest. A smaller monthly repayment does not necessarily mean a cheaper loan.

Example: a £12,000 car loan

Suppose you borrow £12,000 at a fixed annual interest rate of 7.2% over five years.

The monthly rate is 7.2 ÷ 100 ÷ 12 = 0.006, equivalent to 0.6% per month.

These figures assume the rate stays unchanged, every payment is made on time and no additional fees apply. The example rate is illustrative and is not a current loan offer.

Totals are calculated using the unrounded monthly repayment. Multiplying the displayed payment of £238.75 by 60 gives £14,325.00, so a small difference arises from display rounding.

How the loan term changes the cost

For the same £12,000 loan at 7.2% annual interest:

Extending the term from three to seven years reduces the monthly repayment by around £189, but adds approximately £1,934 in interest.

The suitable repayment period depends on both your monthly budget and the total cost you are prepared to pay.

Amortised loans: regular payments of capital and interest

An amortised loan, also written as an amortized loan, is repaid gradually through scheduled payments. Each payment covers interest and reduces part of the principal.

For a standard fixed-rate instalment loan, the regular monthly repayment stays broadly the same. The split between capital and interest changes over time:

• Earlier payments include more interest because the outstanding balance is higher.
• As the balance falls, the monthly interest reduces.
• More of each later payment goes towards clearing the principal.

This is the repayment structure modelled by this calculator. It can provide estimates for straightforward personal loans, car loans and business loans where the same assumptions apply.

Understanding an amortisation schedule

An amortisation schedule shows the repayment process month by month. It typically includes the payment number, payment amount, interest charged, principal repaid and remaining balance.

The Loan Calculator summarises the main repayment figures. Use the separate Amortization Calculator when you want to examine how the balance changes throughout the term.

Secured and unsecured loans

Consumer loans are often described as secured or unsecured. This distinction affects the loan agreement and the consequences of missed payments, rather than the basic repayment formula.

Mortgages are a familiar example of secured borrowing. Many personal loans are unsecured. Missing repayments on either type can have serious consequences; unsecured borrowing does not remove the obligation to repay.

The calculator does not assess which type of loan you qualify for or whether a particular product is suitable.

Personal loans, car loans and business loans

Personal loans

A personal loan repayment estimate can help you explore borrowing for a planned purchase or other expense. Enter the amount borrowed, annual interest rate and term to compare repayment scenarios.

For debt consolidation, compare the total cost of the proposed loan with the debts being replaced. A lower monthly payment can result from a longer repayment period and may increase the amount paid overall.

Car loans and auto finance

The calculator can estimate a straightforward car loan with fixed monthly repayments that clear the balance by the end of the term.

Car finance arrangements involving a deposit, fees, a balloon payment or an optional final payment need additional calculations. A standard loan estimate will not fully represent those agreements.

Business loans

A fixed-rate business loan repaid monthly may follow the same basic formula. However, business finance can include arrangement fees, repayment holidays, variable rates or other terms that this calculator does not model.

Other loan structures and why they need different calculations

Not every borrowing arrangement is repaid through equal monthly instalments.

Loan maturity means the date when the remaining amount becomes due under the agreement. This calculator assumes the borrowing is cleared through monthly repayments over the entered term. It does not model the alternative structures above.

UK student loans

UK government student loan repayments generally depend on income above the threshold for the borrower’s repayment plan. They do not follow the ordinary fixed monthly repayment model used here. Use guidance or a student loan calculator designed for the relevant UK plan.

Mortgages

A repayment mortgage uses a similar mathematical formula, but deposits, loan-to-value ratios, deal periods and overpayments require additional context. Use the Mortgage Calculator for those features.

US-specific products such as FHA loans and VA mortgages have separate eligibility and product rules. This UK-focused loan calculator does not model those rules.

Bonds, face value and payments at maturity

Bonds are another form of borrowing, but their payment structures differ from a standard monthly instalment loan.

The face value, also called par value, is the amount due for repayment at maturity, subject to the issuer meeting its obligations. A coupon bond pays interest at specified intervals, while a zero-coupon bond makes no regular coupon payments and is commonly issued below face value.

A bond’s market price can change before maturity. This calculator does not calculate bond prices, investment returns or zero-coupon bond yields.

Interest and compounding frequency

Compound interest means interest is added to a balance and can itself attract further interest. Compounding frequency can affect calculations where unpaid interest accumulates.

This loan calculator uses a monthly repayment model: each month’s interest is calculated from the remaining principal, and the payment covers that interest while reducing the balance.

It does not allow you to select daily, quarterly or annual compounding. A lender using daily interest calculations or different payment dates may produce a different repayment figure.

How lenders assess borrowing applications

A repayment estimate does not confirm loan approval. Lenders may consider income, regular spending, existing debts, credit history and the information provided in an application.

One general framework for discussing creditworthiness is the five Cs of credit:

This is an explanatory framework, not a universal UK lending checklist. Each lender applies its own criteria. Some products may involve a guarantor or joint borrower, whose responsibilities depend on the agreement.

The calculator does not perform credit checks, assess creditworthiness or predict acceptance.

Formula and calculation method

For a positive annual interest rate, the calculator uses the standard amortised loan formula:

M = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

Where:

• M = regular monthly repayment.
• P = principal or loan amount.
• r = annual interest rate divided by 100 and then by 12.
• n = loan term in years multiplied by 12.

For a zero-interest loan:

M = P ÷ n

The summary totals are calculated as:

Total repayment = Unrounded monthly repayment × Number of payments

Total interest = Total repayment − Principal

Displayed currency amounts are rounded to two decimal places.

Fees, early repayment and additional costs

Check the lender’s terms for costs beyond interest, including:

• Arrangement or lender fees.
• Broker fees.
• Optional insurance.
• Late-payment charges.
• Early repayment or settlement charges.
• Product-specific costs.

These are not automatically included in the results. If a fee is financed as part of the loan, including it in the principal can illustrate the interest charged on that additional borrowing. Fees paid separately still need to be included in your overall budget.

The calculator does not model overpayments or early settlement. Ask the lender for a settlement figure when checking the cost of repaying an existing loan early.

Getting useful results from the calculator

Change one input at a time to understand its effect. Compare:

• A smaller loan amount with the amount originally planned.
• A shorter repayment term with a longer one.
• Different annual interest rates.
• Monthly repayments alongside total interest.

Keep the assumptions consistent when comparing offers. Review the lender’s APR, fees, total amount payable and repayment conditions as well as the calculator’s estimate.

Common mistakes and limitations

The calculator assumes a constant interest rate and monthly repayments made on time throughout the term.

It does not automatically account for variable rates, payment holidays, missed payments, balloon payments, fees, insurance, taxes or early repayment charges.

Enter the annual rate rather than a monthly percentage, and keep all amounts in the same currency. Check that the loan amount represents the borrowing rather than the full purchase price if you are contributing a deposit.

Actual lender figures may differ because of daily interest, payment timing, rounding and product-specific terms. The results are not a credit check, affordability assessment or lending decision.