Understanding loan costs: APR, term and total repayment
A loan's real cost is the total you repay, not the monthly payment. A £10,000 loan over 5 years at 7.9% APR costs £200.99 a month and £2,059 in interest. Stretch it to 7 years and the payment falls to £154.01, but interest rises to £2,937.
£10,000 over 5 years at different APRs.
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5.9% | £192.15 | £1,529 | £11,529 |
| 7.9% | £200.99 | £2,059 | £12,059 |
| 9.9% | £209.91 | £2,594 | £12,594 |
| 14.9% | £232.53 | £3,952 | £13,952 |
| 19.9% | £255.50 | £5,330 | £15,330 |
| 29.9% | £302.05 | £8,123 | £18,123 |
The difference between a good and a poor rate is large. At 14.9% APR you would pay £1,892 more in interest than at 7.9%, for exactly the same loan.
£10,000 at 7.9% APR over different terms.
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 2 years | £450.58 | £814 | £10,814 |
| 3 years | £311.65 | £1,219 | £11,219 |
| 4 years | £242.38 | £1,634 | £11,634 |
| 5 years | £200.99 | £2,059 | £12,059 |
| 7 years | £154.01 | £2,937 | £12,937 |
A longer term makes each payment smaller but keeps the debt for longer, so you pay interest for more months. Choose the shortest term whose payment fits comfortably in your budget.
What the terms mean.
- APR (Annual Percentage Rate): the yearly cost including interest and any compulsory fees, so it is the fairest way to compare loans.
- Representative APR: the rate at least 51% of successful applicants get. Up to 49% can be offered a higher rate, so always check your personal quote.
- Soft search / eligibility checker: shows likely rates without affecting your credit score. Use it before a full application.
- Total amount repayable: everything you will pay back. Compare this figure between offers.
- Early settlement: you have a legal right to repay early. Lenders can charge a limited amount of extra interest, usually up to 58 days' worth.
Rates are often lowest for loans between about £7,500 and £25,000. Borrowing slightly more to reach a cheaper rate band can occasionally cost less overall, but only borrow what you need.
Try different amounts, APRs and terms in the personal loan calculator.
Loan cost FAQs
How is the monthly payment worked out?
Personal loans use a fixed payment that covers that month's interest plus some of the balance. In month one on £10,000 at 7.9% APR, about £63.56 of the £200.99 payment is interest; by the final year almost all of it repays the balance.
Is it cheaper to pay a loan off early?
Usually yes. You stop paying interest on the money you repay, minus any early settlement charge, which is capped by law.
What is the difference between APR and interest rate?
The interest rate is just the charge on the money borrowed. APR also includes compulsory fees and shows the cost as a yearly rate, so two loans with the same interest rate can have different APRs.
Is a 0% credit card cheaper than a loan?
It can be, if you clear the balance before the 0% period ends and the transfer fee is low. If not, the rate afterwards is often much higher than a personal loan.
FCA: understanding APR · MoneyHelper: personal loans. Figures are worked examples for planning, not financial advice.