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Monthly repayments use the standard amortisation formula: M = P × [r(1+r)^n] ÷ [(1+r)^n − 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments. This ensures the loan is fully paid off at the end of the term.

An amortisation schedule is a table showing each payment period — how much of each payment goes toward interest and how much reduces the principal balance. Early payments are mostly interest; later payments are mostly principal.

Higher interest rates increase both your monthly payment and the total amount repaid. For example, on a £10,000 loan over 5 years, moving from 5% to 10% APR increases monthly payments by roughly £25 and total interest by over £1,400.

The interest rate is the base cost of borrowing. APR (Annual Percentage Rate) includes the interest rate plus any fees charged by the lender, making it a more complete measure of the true cost of credit. This calculator uses the interest rate you enter directly.

A shorter term means higher monthly payments but much less total interest paid. A longer term reduces monthly payments but significantly increases the total cost. Use the calculator to compare scenarios by changing the term length.