Loan Calculator

Loan types

There are several types of loans available, including:

• Personal loans: Also known as unsecured loans, these don’t require any form of security.
• Secured loans: You need to put forward your home or another valuable item as security for a secured loan. The lender may repossess this property if you default on the loan.
• Unsecured loans for bad credit: These are like personal loans except they are specifically designed for borrowers with poor credit histories. Bad credit loans are likely to charge a higher rate of interest than standard personal loans.
• Secured loans for bad credit: These are simply secured loans designed for those with bad credit scores. Lenders may be more willing to offer secured loans to borrowers they perceive as “higher risks” because the property (or item used as collateral) gives them extra security. However, there can be serious consequences if the borrower falls behind on payments.
• Guarantor loans: These are a type of unsecured loan, but the borrower will name another individual as guarantor on the loan agreement. The guarantor agrees to repay the loan if the borrower is unable to.

How to use our loan repayment calculator

It’s free, quick and straightforward to use our loan calculator, and it won’t affect your credit score.

You simply need to input the amount you want to borrow, the number of months you want to borrow over, and the annual percentage rate (APR) of the loan.

When you’re ready, click “calculate” to see how much your monthly repayments would be and the amount you would repay overall, based on the information you provide.

You can adjust these fields to see how they affect your monthly payment and the total amount you repay.

The calculator assumes the interest rate remains fixed for the duration of the term.

Why should I use a loan repayment calculator?

It’s a good idea to use a loan calculator before applying for a loan as this can help you work out what loan size and term to apply for.

For example, you can see how changing the term could affect the loan, whether you’re trying to lower the monthly payments or reduce the total amount you repay.

This will allow you to see if a loan would be an affordable option for you and if you could realistically make the required payments.

As a result, a loan interest calculator could stop you from applying for a loan you can’t afford or give you confidence in being approved if it shows the monthly payments would be comfortably within your budget.

Taking out a loan you can’t afford could put a strain on your finances as you try to cover the monthly payments and, in a worst-case scenario, you could default on the loan. This could have serious consequences for your credit history and your overall financial situation.

Examples of using a loan repayment calculator

Example one: Someone wants to borrow £8,000 to pay for some bathroom refurbishments. They have a good credit history and want to pay off the loan as quickly as possible. To see their estimated monthly repayments, they use the loan calculator and adjust the loan term to see the shortest term they could get while still being able to afford the payments.

Example two: Someone wants to buy a car, and they’re wondering whether it would be cheaper to take out a personal loan or a form of car finance. They use the loan calculator to get a rough guide of how much a loan would cost in total and what the monthly payments could be, compared to using a car finance agreement.

How is loan interest calculated?

Most lenders charge a fixed rate of interest on their unsecured personal loans. This means you’ll pay the same rate of interest for the whole loan term.

The interest rate is charged as a percentage of the amount borrowed.

Lenders may calculate and charge interest in slightly different ways, so it’s a good idea to check the total amount repayable before taking out a loan.

What does APR mean?

APR stands for annual percentage rate and tells you the total cost of borrowing over one year.

It takes into account the interest rate as well as any fees charged as standard. The higher the APR, the more expensive your loan.

Lenders advertise a representative APR on their loans, but it’s important to note that you may not necessarily receive this rate. Only 51% of successful applicants need to receive this rate; the remaining 49% could be charged more than this.

When you apply for a loan or check your eligibility, you will receive a personal APR which is the rate the lender will charge you based on the information you have provided.

Why APR matters

The APR is important because it allows borrowers to compare the cost of personal loans on a like-for-like basis.

This can make it easier to find the cheapest option, as it means you don’t need to check for any fees that may be charged alongside the interest.

For example, it could be difficult to work out whether a loan with a low interest rate and a high fee is more or less expensive than a loan with a higher interest rate but no fee. The APR removes this complication as it takes both factors into account to show you the annual cost of a loan.

The Financial Conduct Authority (FCA) sets certain rules that lenders need to follow to calculate their APR, to ensure firms display the cost of their loans in a consistent and transparent way. This means you don’t need to spend time working out the APR yourself with an APR calculator; the lender will always do this for you and tell you the APR you qualify for.

APR vs. interest rate: What’s the difference?

While the interest rate and APR both tell you how much a loan will cost, the APR includes the cost of any fees in addition to the interest.

This means that the APR and interest rate on a loan could be the same if the lender doesn’t charge any fees.

However, if a loan does come with a fee, the APR will be higher than the interest rate and provide a more accurate reflection of the total cost of the loan.

What factors can affect your loan repayments

Several factors can affect the size of your monthly loan repayments including:

• the amount you borrow
• the interest charged by the lender
• your loan term.

Because your credit history and overall financial situation can influence the interest rate you receive from the lender, they will also indirectly affect the size of your loan repayments.

The table below is an illustration of the impact your credit score could have on your monthly loan repayments, based on a loan of £5,000 borrowed over a term of three years.

Note that the APR figure for each credit score won’t necessarily reflect the APR you may be charged should you apply for a loan with that credit rating.

These figures are calculated using our loan calculator.

How long should my loan term be?

It’s up to you how long your loan term is.

Even though a longer loan term means your monthly payments will be smaller, this means you’ll pay more interest overall.

As a result, it’s better to choose as short a loan term as possible (that still allows you to afford the monthly payments) so you pay less interest.

The table below shows the effect that different loan terms can have on a loan of £5,000 with an APR of 9.9%.

These figures are calculated using our loan calculator.

Limitations of loan repayment calculators

A UK loan repayment calculator can be a useful guide, but there are some limitations as they’re not tailored to your individual situation.

For example, you may not know the exact interest rate you would be charged until you actually apply for a loan. This means the monthly payments and total interest charged may be different to the sums indicated on the calculator.

Furthermore, it won’t account for any changes made during the loan term, such as changing the payment date or making an overpayment.

How to reduce the cost of a loan

If you want to cut the cost of a loan, there are several options you could consider.

• Shorten the loan term. Even though a longer loan term means your monthly repayments are smaller, you pay more interest overall. By repaying your loan over a shorter term, you can cut the amount of interest you pay.
• Improve your credit score. A better credit score could allow you to access loans with more competitive interest rates. Lenders typically view borrowers with a better credit score as a lower risk, which can make them more likely to offer a lower rate of interest than for someone with a poorer credit history.
• Compare loans. Before applying for a loan, it’s worth comparing options to find the cheapest deal that meets your requirements. It’s also possible to check your eligibility for a loan to see which deals you qualify for.
• Pay off your loan early. Once you have a loan, you can reduce the amount of interest you pay by making overpayments or by clearing your loan balance in full before the end of the term (if you can afford to do so). Make sure you check for any early repayment charges.

How to improve my chances of being accepted for a loan

If you’ve used the loan calculator and decided to apply for a loan, you could improve your chances of approval by:

• Checking and improving your credit score. It’s a good idea to look at your credit score with the three main credit reference agencies (Experian, Equifax and TransUnion) to check if there’s anything that could affect your loan application. Lenders may be more likely to approve an application and offer a lower interest rate to borrowers with a better credit history. See our guide for tips on how to improve your credit score.
• Managing your existing credit commitments. Ensure you make the required payments on your credit card, mortgage and any other credit facilities as this indicates to lenders that you can be trusted to pay off the loan in full and on time.
• Check the amount of debt you have. If you have too much debt on existing loans, credit cards or overdrafts, lenders may be wary about offering you another loan.
• Have a reliable income. Having a steady income that will allow to comfortably afford the loan repayments is likely to help your application.
• Checking your eligibility. You can see your chances of approval for a loan by checking your eligibility before applying.

FAQs

Why are loan repayments important?

Loan payments are important because they have a direct impact on your credit score and, consequently, your financial situation. Late or missed payments could negatively affect your credit score and cause more serious consequences for your finances, affecting your ability to get credit in the future, for example.

What happens if I miss a loan repayment?

If you miss a loan payment, this is likely to be recorded on your credit file and could harm your score. The lender may also charge a penalty fee.

Can I change my loan repayment date?

Yes, you may be able to ask the lender to change the repayment date of your loan. However, this may be subject to certain terms.

What is the impact of changing my repayment schedule?

Some lenders may allow you to change your repayment date, but this could affect the amount of interest charged. Check with the individual lender before changing your repayment schedule to see what the impact would be.

How to calculate interest on a loan

Because lenders can calculate and charge interest in different ways, it can be difficult to work out yourself how much interest you could be charged.

Instead, it’s worth considering a free personal loan calculator UK consumers can use to get a rough guide of how much a loan could cost. Then, when you’re ready to check your eligibility or apply for a loan, the lender will tell you the exact amount of interest it will charge.