Calculate monthly payments and full amortization for any loan
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Monthly payments are calculated using the standard amortisation formula: M = P[r(1+r)^n]/[(1+r)^nā1], where P is the loan amount, r is the monthly interest rate (annual rate Ć· 12), and n is the number of monthly payments. This ensures each payment covers the month's interest plus a portion of the principal, fully paying off the loan by the last payment.
An amortisation schedule is a table showing every payment over the life of a loan, broken down into principal and interest. In the early months, most of each payment goes toward interest. Over time, the balance falls, so less interest accrues and more of each payment pays down the principal. Our calculator generates the full schedule so you can see exactly how your loan balance decreases each month.
Yes ā significantly. On a Ā£20,000 loan at 8% over 5 years, adding an extra Ā£100/month saves over Ā£500 in interest and pays the loan off several months early. The savings are greatest in the early years when the balance ā and therefore the interest charged ā is highest. Even a one-off lump sum payment reduces future interest considerably.
The interest rate is the annual cost of borrowing the principal, expressed as a percentage. APR (Annual Percentage Rate) includes the interest rate plus any fees and charges, giving a more complete picture of the total cost of borrowing. Always compare APR rather than just the interest rate when shopping for a loan.
This calculator works for any fixed-rate instalment loan: auto loans, personal loans, student loans, home equity loans, and more. It does not apply to revolving credit like credit cards, where the balance and minimum payment change monthly. For mortgages with features like offset or overpayment tracking, use our dedicated mortgage calculator.
This calculator uses the standard annuity formula: Monthly Payment = P Ć [r(1+r)^n] / [(1+r)^n ā 1], where P is the principal, r is the monthly interest rate (annual rate Ć· 12), and n is the total number of monthly payments. The result is a fixed monthly payment where the proportion going to interest decreases each month as the outstanding balance falls ā a process called amortisation.
In the early months, the vast majority of your payment covers interest. On a 25-year mortgage at 4.5%, roughly 70% of the first payment is interest. By year 20, most of the payment goes to principal. This is why overpaying early has such a disproportionate impact on total interest paid ā every pound of extra principal reduces the balance on which all future interest is calculated.
The interest rate used here is the nominal annual rate used to calculate interest charges. The Annual Percentage Rate (APR) is broader ā it includes fees and other costs, standardised for comparison between lenders. For mortgages especially, the APR can be significantly higher than the nominal rate once arrangement, valuation, and broker fees are included. Always compare APRs rather than headline rates when evaluating loans. For UK mortgages, also factor in what happens at the end of your fixed period ā rolling onto a lender's Standard Variable Rate (SVR) typically adds hundreds of pounds per month versus remortgaging.
Figures are estimates for guidance only. See about this site ā how we source data and what these tools can and cannot do.
Every loan payment is split between interest and principal repayment. In the early months, the split heavily favours interest ā most of your payment services the debt rather than reducing it. As the outstanding balance falls, the interest portion shrinks and the principal repayment grows. By the final payments, almost everything goes toward the principal.
For a Ā£15,000 personal loan at 8% over 5 years, the first payment of roughly Ā£304 includes approximately Ā£100 of interest and Ā£204 of principal. The last payment includes only Ā£2 of interest and Ā£302 of principal. Total interest paid over the full term: approximately Ā£3,247 ā equivalent to paying about 22% extra on top of the amount borrowed.
Making even small overpayments early in a loan's life has a disproportionate impact on total interest paid. Because interest is calculated on the outstanding balance each month, reducing the balance earlier means less interest accrues over the remaining term.
On the same Ā£15,000 loan at 8% over 5 years, adding Ā£50/month to every payment reduces the total interest from Ā£3,247 to approximately Ā£2,450 ā a saving of nearly Ā£800 ā and pays off the loan around 10 months early. The earlier in the term you make overpayments, the greater the saving, because you eliminate interest that would have compounded over many future months.
Check your loan agreement for overpayment penalties. Most personal loans in the UK allow overpayments without charge, though some fixed-rate products impose early repayment charges (typically 1ā2 months' interest).
The Annual Percentage Rate (APR) includes the interest rate plus any mandatory fees, expressed as an annual figure. It is designed to allow comparison between loan products. A loan advertised at 7.9% interest might have an APR of 8.4% once arrangement fees are included. For short-term loans, fees have a larger proportional effect on APR.
UK lenders are required to advertise a "representative APR" ā the rate at which at least 51% of approved customers are offered the product. Your personal APR may be higher based on your credit score and income. Always compare APR rather than headline interest rate when shopping for loans.
Personal loans are typically better for planned, one-off borrowing where you know the total amount upfront ā home improvements, car purchase, debt consolidation. The fixed term and fixed monthly payment make budgeting straightforward. Interest rates on personal loans are generally lower than on credit cards, especially for amounts above Ā£5,000.
Credit cards offer flexibility ā you only borrow what you need and can repay early without penalty. 0% purchase or balance transfer cards can be effectively interest-free for the promotional period (typically 12ā30 months), making them excellent for short-term borrowing if you are confident of repaying within the period. The risk is the revert rate ā typically 21ā24% APR ā if the balance remains after the promotional period ends.
Amortisation calculations use standard annuity mathematics. APR definition follows the Consumer Credit Directive as implemented in the UK Consumer Credit Act. All figures are estimates for planning purposes ā actual loan terms depend on lender assessment and your personal credit profile.
Researched and maintained by Iulian, founder of Flux Media Systems. General information, not professional advice — about this site & our sources →