Loan Calculator — Compare Offers by True Cost of Credit

Calculate your monthly loan payment, total interest paid, processing fees, and full repayment cost for any loan type.

The Advertised Rate Is Not the Price of the Loan

Loans are marketed on the interest rate because it is one number and it is easy to compare. It is also not what the loan costs you. The figure that matters is the total cost of credit: everything you hand back, minus everything you actually received.

Cost of credit = (Instalment × Number of payments) − Cash actually received

That second term is where offers diverge. A loan advertised as 300,000 does not necessarily put 300,000 in your account, and a loan with a lower rate can easily cost more than one with a higher rate.

A Worked Comparison Where the Lower Rate Loses

Two offers, both 300,000 over four years.

Offer A wins on the rate, wins on the monthly payment, wins on total repaid — and still costs more, because 9,000 was taken out before the money arrived. It also leaves you 9,000 short of what you needed to borrow.

Any of the first three lines read alone points at the wrong offer. Only the last line answers the question.

Where Fees Hide

Fees do the same damage in two different ways, and the second is easier to miss.

Deducted from the advance. You borrow 300,000, receive 291,000, and repay interest on the full 300,000. You are paying interest on money you never had.

Added to the principal. You need 300,000, so the lender writes the loan for 309,000 and you receive the amount you asked for. The instalment is higher and the fee itself accrues interest for the whole term.

Either way the cost-of-credit calculation catches it, which is the argument for using that figure rather than any of the headline numbers. Other charges worth asking about explicitly: early settlement penalties, late payment fees, mandatory insurance bundled into the agreement, and any charge for a payment date change.

What APR Does and Does Not Tell You

An annual percentage rate exists precisely to solve the problem above. It expresses the interest and the compulsory fees as a single annualised rate, so that two offers can be compared on one number even when they are structured differently. Where regulation requires it to be quoted, comparing APRs is more reliable than comparing headline rates.

Its limits are worth knowing. What counts as a compulsory charge is defined by regulation, so optional add-ons can sit outside the figure. Advertised APRs are often described as representative, meaning only a proportion of successful applicants need to receive it — the rate you are actually offered after a credit assessment can be higher. And the calculation assumes the loan runs its full term, so it does not describe the cost if you settle early.

Use APR to shortlist, and the cost of credit on the actual offer you are given to decide.

Term Versus Rate

Two levers change the instalment and they behave very differently. Negotiating the rate down reduces both the monthly payment and the total. Extending the term reduces the monthly payment and increases the total, often substantially.

Borrowers under pressure tend to reach for the term, because it is the lever a lender will always agree to. It is worth being clear that those two conversations are not equivalent: a longer term is not a better deal, it is the same deal spread thinner. Our EMI calculator shows the interest cost of each additional year directly.

How Much You Can Borrow Versus How Much You Should

Lenders assess affordability with a debt-to-income ratio — the share of gross monthly income consumed by debt repayments.

Debt-to-income = Total monthly debt payments ÷ Gross monthly income × 100

Someone earning 5,000 a month with 1,000 of existing commitments is at 20%. Adding a 750 instalment takes them to 35%. Lenders commonly get uncomfortable somewhere in the high thirties to low forties, though the threshold varies by lender and by product.

Two cautions about that number. It uses gross income, so it overstates what you can comfortably service — the payments come out of take-home pay, not gross. And an approval reflects the lender's appetite for risk, not your household budget. The more useful personal test is what remains after the new instalment and all your other commitments, and whether that still absorbs an unexpected cost.

Paying It Off Sooner

Three approaches work, in ascending order of effect.

• Round the payment up. Paying 8,000 against a 7,681 instalment sends the surplus straight to principal every month. It is small, automatic, and requires no decision after the first one.
• Apply irregular income. A bonus or a tax refund put against the balance removes all the future interest that principal would have carried, which is why the same amount is worth far more early in the term than late.
• Clear the most expensive debt first. With several debts, paying minimums on all and directing everything spare at the highest rate minimises total interest. Clearing the smallest balance first is easier to sustain psychologically and costs more; either is defensible provided the choice is deliberate.

Before overpaying, confirm there is no early settlement penalty and check whether the lender applies overpayments to the principal immediately or holds them. Both details determine whether the strategy works at all.

For property borrowing, where the term is far longer and the interest front-loading much more pronounced, use the mortgage calculator. To see how a loan balance sits against everything else you own, the net worth calculator puts it in context.

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