Loan Interest Calculator

How Loan Interest Works

Personal loans in the UK typically charge a fixed interest rate over a set repayment period. You borrow a lump sum and repay it in equal monthly instalments that cover both interest and capital, similar to a repayment mortgage but usually over a shorter term (1-7 years).

APR Explained

The APR (Annual Percentage Rate) represents the true annual cost of borrowing, including any fees. By law, UK lenders must show the APR so you can compare like with like. A "representative APR" means at least 51% of successful applicants will receive that rate or better — the actual rate you're offered may differ based on your credit score.

Shorter Term vs Lower Rate

A common dilemma: is a lower rate over a longer period better than a higher rate over a shorter one? Use the comparison feature above to check. Often, the shorter term costs less in total interest even if the rate is slightly higher — because you're borrowing for less time.

Frequently Asked Questions

How much will my loan cost in total?

The total cost is the original amount plus all interest. For a £10,000 loan at 7% APR over 5 years, total interest is approximately £1,880, making the total cost about £11,880. Enter your specific figures in the calculator above.

Is a lower interest rate always better?

Usually, but not always. A 5% loan over 7 years can cost more in total interest than an 8% loan over 3 years. Always compare the total amount repaid, not just the rate or monthly payment.