Loan Calculator

Lenders advertise the monthly payment because it is the smallest, friendliest number in the deal. The number that actually tells you what a loan costs is the total interest, and it is almost never on the poster.

Running the numbers

1. Enter the amount you want to borrow.
2. Enter the annual interest rate — use the APR if you have it, since it includes fees.
3. Set the term in months or years.
4. Read the monthly payment, the total repaid, and the total interest.
5. Try a shorter term and watch what happens to the interest figure.

Why the term matters more than people expect

Stretching a loan over a longer period lowers the monthly payment, which feels like a win. It also means you are borrowing the money for longer, and interest accrues the entire time.

Borrow 20,000 at 7% over three years and you pay roughly 2,240 in interest. Take the same loan over seven years and the monthly payment drops noticeably — but the interest climbs past 5,400. Same loan, same rate, more than double the cost. Always check the total, not just the monthly figure.

The terms lenders use

• Principal — the amount you actually borrow, before any interest.
• Interest rate — the annual cost of borrowing, expressed as a percentage of the outstanding balance.
• APR — the rate including compulsory fees. This is the number to compare between lenders, not the headline rate.
• Term — how long you have to repay. Longer terms mean smaller payments and more total interest.
• Amortisation — the schedule showing how each payment splits between interest and principal. Early payments are mostly interest.

Before you commit

• Compare APR, not the advertised rate, or you are comparing different things.
• Check whether early repayment carries a penalty — many loans do.
• Work out the total repaid, then ask whether the purchase is worth that number.
• Watch for arrangement fees rolled into the principal.
• A variable rate can move; run the numbers at a rate two or three points higher to see if it still works.

Loan questions