What is the difference between interest rate and APR?

The interest rate covers only the cost of borrowing the money. APR also folds in compulsory fees, so it is the fairer figure for comparing offers.

Does this include fees or insurance?

No. Arrangement fees, payment protection and late charges sit on top unless they are already baked into the APR you entered.

How much does overpaying save?

A great deal, because every extra pound goes straight against principal and removes all future interest on it. Even one extra payment a year can cut months off a typical five-year loan.

Loan Calculator

Work out the monthly payment on a personal, student or business loan, plus how much of the total you hand over in interest across the full term.

Fill in the fields above and select Calculate to see your result and the full working.

Please note: Financial calculators produce estimates using the figures you enter. They exclude fees, taxes, insurance and rate changes unless a field asks for them. They are not financial advice — confirm any significant decision with a qualified adviser or your lender.

Formula used

M = P · r ÷ (1 − (1 + r)⁻ⁿ), where r is the monthly rate and n the number of payments

How to use this calculator

Enter the amount you want to borrow.
Add the annual rate — use the APR if you have it, since it includes most fees.
Set the term in years.
Compare the total interest across different terms before choosing: a longer term lowers the monthly payment but raises the total cost.

Example calculation

$20,000 at 8.5% APR over 5 years:

Monthly rate = 0.085 ÷ 12 = 0.0070833

n = 60 payments

M = 20,000 × 0.0070833 ÷ (1 − 1.0070833⁻⁶⁰) = $410.24

Total repaid = $24,614, so $4,614 of interest.

What does this result mean?

The monthly payment stays constant, but its composition changes. Early payments are mostly interest; later ones are mostly principal. That is why overpaying early saves disproportionately more than overpaying near the end, and why refinancing late in a term rarely helps much.

Frequently asked questions

What is the difference between interest rate and APR?: The interest rate covers only the cost of borrowing the money. APR also folds in compulsory fees, so it is the fairer figure for comparing offers.
Does this include fees or insurance?: No. Arrangement fees, payment protection and late charges sit on top unless they are already baked into the APR you entered.
How much does overpaying save?: A great deal, because every extra pound goes straight against principal and removes all future interest on it. Even one extra payment a year can cut months off a typical five-year loan.

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