Personal Loan Calculator

A personal loan is repaid in fixed monthly instalments over an agreed term, typically one to seven years. Each payment covers a portion of the principal plus interest. The interest is usually calculated on the reducing balance, meaning you pay less interest as the outstanding amount shrinks. On a long loan the earliest instalments are therefore weighted heavily towards interest rather than principal, which is why the balance seems to barely move in the first year or two.

Lenders advertise a representative APR, which at least 51% of approved applicants must receive. Under FCA CONC 3.5 the other 49% can be offered a higher personalised rate based on credit score, income and existing debt. Your actual rate also depends on the amount you borrow, since rates tend to be lowest in the £7,500-£15,000 range and higher for smaller or larger sums. Before applying, run a soft search through MoneySavingExpert's Eligibility Checker, ClearScore, Experian or CompareTheMarket. Soft searches do not damage your credit score and show your likely acceptance odds and personalised rate, whereas a hard search leaves a footprint for 12 months and costs 5-10 points each time.

This calculator uses the standard annuity formula to compute your monthly repayment, total interest and overall cost. An APR is an annual effective rate, so the monthly rate is (1 + APR)^(1/12) − 1 rather than the APR divided by 12, and a table under the result shows the same loan over every term from 1 to 7 years. Borrow £10,000 at 6.9% APR over 5 years and the monthly repayment works out at £196.56, or £11,793.43 across 60 months, of which £1,793.43 is interest. Stretching the same debt further is where the arithmetic turns against you: at 8% APR a £10,000 loan costs £201.43/month over 5 years and £2,085.83 in interest, against £119.86/month over 10 years and £4,382.90 in interest.

Which product wins depends on size and term. For short-term borrowing of 1-2 years under £5,000, a 0% purchase credit card is usually cheapest provided you clear the balance before the promotional period ends, typically 18-24 months. For £5,000-£25,000 over 2-7 years, personal loans typically win at 8-15% APR. Authorised overdrafts have been required to charge a single APR since the April 2020 reforms and are usually the most expensive option at 35-40% EAR, so treat them as emergency money rather than planned borrowing. Credit union loans such as London Mutual, Hoot or Plane Saver charge 12.7-26.8% APR and are often open to people with poor credit.

Early settlement is a statutory right under the Consumer Credit Act 1974, so you can clear a personal loan at any point. On a fixed-rate loan, section 95A of the Act lets the lender claim compensation only if you repay more than £8,000 early in any 12-month period. The charge is then capped at 1% of the amount repaid early, or 0.5% if a year or less of the term remains, and can never exceed the interest you would have paid over the rest of the term. It rarely outweighs the interest you avoid, particularly early in a long loan when most of each payment is interest rather than principal. Read the agreement first, and ask for a settlement statement, which your lender must provide within 7 working days of the request.

Personal loans are unsecured, granted purely on your creditworthiness. Secured loans, sometimes called homeowner loans, use your home as collateral and so allow larger amounts of £10,000-£500,000+ over terms of up to 30 years at lower rates of 5-10%. The trade is severe, because default lets the lender force the sale of your home. Logbook loans secured on a car are worse again, typically 200%+ APR. They are regulated consumer credit, so the lender must be FCA-authorised and the Consumer Credit Act applies, but the car is held under a bill of sale under the Bills of Sale Acts of 1878 and 1882, so the lender can repossess it after a default notice without going to court. An unsecured loan at a higher APR is usually the safer choice unless you fully understand the consolidation maths.

Consolidating several debts into one loan can cut the monthly outgoing and simplify the admin, but it only saves money on two conditions. The new APR must be lower than the weighted average of the old debts, and the term must not stretch so far that you pay more total interest. A common trap is rolling credit card debt that would clear in 3 years at 22% APR into a 7-year loan at 12% APR, where the lower rate is cancelled out by paying interest over more than double the time. Stopping use of the cleared cards matters just as much as the rate.