Estimate monthly loan payments and total interest costs

What the monthly figure hides

Every loan has three numbers that matter: the monthly payment, the total paid over the life of the loan, and the total interest. Lenders lead with the first. The second tells you what the loan actually costs. The third tells you whether it's a good deal. This calculator gives you all three because the monthly figure alone is usually the least informative of the set.

How amortisation actually works

Each monthly payment covers two things: interest on the remaining balance, and repayment of principal. In the early months of the loan, the balance is high, so the interest portion is high. As the balance falls, the interest portion falls, and more of each payment goes to principal. The monthly payment is constant; the split inside it changes every month. For a 10,000 loan at 9% over 5 years, the first payment is roughly 75 interest and 133 principal. The final payment is roughly 2 interest and 206 principal. Same payment, different work.

Why early payments punch above their weight

The front-loaded interest structure has a practical consequence: overpayments in the first half of a loan save significantly more total interest than equivalent overpayments near the end. 1,000 overpaid in month 6 of a 5-year 10,000 loan at 9% saves roughly 230 in interest. The same 1,000 overpaid in month 54 saves under 20. If you're going to overpay, the best time is as early in the loan as possible. The worst time is when you're already most of the way through.

APR vs interest rate: not the same thing

The quoted "interest rate" is the cost of the money. The APR includes mandatory fees spread across the life of the loan. For a 10,000 loan at 8% interest with a 400 arrangement fee, the APR can be 9.5%+ — meaningfully higher than the headline rate. When comparing loans, APR is the honest comparison. When a loan's headline rate is dramatically lower than its APR, that gap is the fees, and those fees are the real cost difference.

The term-length trade-off

Longer term means lower monthly payment, higher total interest. 10,000 at 9% over 3 years: monthly 318, total interest 1,440. Over 5 years: monthly 208, total interest 2,460. Over 7 years: monthly 161, total interest 3,530. Extending the term by 4 years saves 157/month but costs 2,100 extra in total. The question is whether that 157 monthly flexibility is worth 2,100 over the loan's life. For essential borrowing (a car you need for work), often yes. For discretionary borrowing, rarely.

Fixed vs variable rate

Fixed-rate loans lock your payment for the term. Variable-rate loans move with the base rate — cheaper now if rates are falling, more expensive if they rise. In a stable or falling-rate environment, variable often wins. In a rising-rate environment, fixed wins. In an uncertain environment, fixed is the risk-averse choice. Most personal loans are fixed-rate by default; variable rates are more common on specific products like HELOCs or tracker mortgages. For a standard personal loan, fixing makes the planning easier.

Early repayment: check the charge first

Some loans let you overpay or clear the balance penalty-free; others charge an early-repayment fee (typically 1–2 months of interest, or a percentage of the balance). For regulated loans, the Consumer Credit Act caps the fee at the interest the lender would have earned in the following month or two — not the whole remaining term. Still, it's worth confirming before overpaying. The calculator above assumes a clean early-payoff option; if your loan has a charge, subtract that from the savings when deciding whether to pay down early.

When overpayment is mathematically wrong

Overpaying a loan is earning a illustrative returns equal to the loan's interest rate. That's good when the rate is high. It's not always the best use of the money. If you have high-interest credit card debt at 22%, paying that down first returns 22%. Paying down a 4.5% mortgage returns 4.5%. Workplace pension contributions with employer match return the match instantly — often 100%+ on the marginal contribution. The hierarchy for spare money is typically: (1) high-interest debt, (2) emergency fund, (3) pension to the match, (4) tax-advantaged savings account, (5) overpayment of lower-rate debt, (6) non-tax-advantaged investment. A 9% personal loan sits high in that list; a 3% student loan sits low.

Consolidation: sometimes good, sometimes a reset

Consolidating multiple debts into one loan can reduce your average rate and simplify payments. It becomes a problem when the new loan has a longer term than the old debts combined — then you've reduced monthly pain but extended how long you're paying interest. Before consolidating, calculate the total interest of the existing debts if you kept paying them, versus the total interest on the consolidation loan. If consolidation increases the total, you're paying for convenience rather than saving money.

What the calculator leaves out

The tool models principal and interest on a fixed-rate loan with no fees. Real loans include arrangement fees, late-payment charges, and sometimes compulsory insurance. For the true cost, add all fees to the loan's total. The number you see here is the minimum honest cost; reality is usually slightly higher.