How to use the Loan Calculator
- Enter the amount you actually receive, after any deducted arrangement fee.
- Enter the annual rate; if you only have a monthly rate, multiply it by twelve first.
- Enter the term in months or years to match how the lender quotes it.
- Compare the total interest figure, not the monthly payment, when choosing between offers.
How the calculation works
Installment loans use the same annuity maths as a mortgage: a level payment covering interest on the declining balance plus enough principal to clear the debt by the last payment. The consequence is that the effective cost of a loan depends on two things the advertisement rarely emphasises — the term and any fee rolled into the principal.
Comparing offers on monthly payment alone is how borrowers end up paying more. A lower payment achieved by extending from three years to five can raise total interest by more than half even at an identical rate, because the balance is exposed to interest for two extra years.
Payment = P × r / (1 − (1 + r)^−n) with r = periodic rate, n = number of paymentsSource: Present-value-of-an-annuity formula, the standard basis for consumer installment lending.
Worked example
A borrower takes 14,500 over 4 years at 9.9% APR to consolidate card debt.
- Periodic rate r = 0.099 / 12 = 0.00825; payments n = 48.
- (1 + r)^−n = 1.00825^−48 ≈ 0.67418.
- Payment = 14,500 × 0.00825 / (1 − 0.67418) = 119.63 / 0.32582.
Monthly payment ≈ 367. Total repaid ≈ 17,620, so interest costs about 3,120 over the four years.
Frequently asked questions
Is a lower monthly payment always the better deal?+
No. Lower payments usually come from a longer term, which increases total interest. Compare the total amount repayable over the life of each loan and only then check that the monthly figure fits your budget.
How do arrangement or origination fees change the result?+
If the fee is deducted from the advance, you receive less than the principal you are being charged interest on. Enter the full principal to get the correct payment, and treat the fee as an additional cost when comparing offers.
Can I save money by paying the loan off early?+
Usually yes, since interest stops accruing on the principal you repay. Check for an early repayment charge first — some agreements recover part of the interest the lender expected to earn.
What is the difference between the interest rate and APR here?+
The interest rate drives the payment; APR annualises the rate together with compulsory fees so different offers can be compared. Two loans with the same rate can have very different APRs.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.