Loan Calculator: Working Out Repayments on Personal, Car and Business Loans
A loan calculator shows what any fixed-rate instalment loan will actually cost. Enter the amount, annual interest rate and term, and you get the repayment per period, the total repaid and the total interest — the three numbers that tell you whether a loan is affordable and whether it is good value.
How instalment loans work
Personal loans, car finance and most small business loans are amortising: you repay equal instalments that cover interest on the remaining balance plus a slice of principal. Because interest is charged on what you still owe, the interest portion shrinks each period while the principal portion grows.
This is different from interest-only or revolving credit, where the balance does not fall automatically. If your agreement quotes a flat rate on the original amount rather than the reducing balance, the true cost is far higher than it looks.
APR versus interest rate
The interest rate is the cost of borrowing the money. The APR also folds in arrangement fees and compulsory charges, so it is the fairer basis for comparing offers. When you compare two loans, put each one's APR into the calculator rather than the headline rate — the gap between them can be worth hundreds.
Shortening the term versus lowering the payment
- Longer term: lower payment, more total interest, and slower equity build-up on secured loans.
- Shorter term: higher payment, materially less interest, and faster freedom from the debt.
- Overpayments: check for early repayment charges first, then aim any spare cash at the highest-rate debt.
Key takeaways — Loan Calculator
- Interest is charged on the reducing balance, so early payments cost more in interest.
- Compare loans on APR and total repaid, not on monthly payment alone.
- A shorter term is the single most reliable way to cut total interest.