Personal loan
For car finance, personal loans or any fixed-rate borrowing. See the monthly payment and the true cost once interest is added.
The loan
The cost of borrowing
APR is treated as a simple annual rate compounded monthly. Lenders quote APR in a standardised way that can include fees, so the headline figure may differ slightly.
Reading a personal loan honestly
Three numbers describe any loan: the amount, the APR and the term. The advert shows you the monthly payment because it's the smallest of the lot. £12,000 at 8.9% over three years is £381.04 a month, and the figure that deserves equal billing is £13,717, the total you'll repay, £1,717 of it interest. APR is the yearly cost including fees, so it's the honest comparison rate between lenders, and the representative APR in the advert only has to go to 51% of accepted customers. The rate you're offered depends on your file, and it's allowed to be worse.
The seductive longer term
Stretch the same £12,000 to five years and the payment falls to £248.52, which feels £132 more comfortable each month. Total interest rises to £2,911, £1,194 more than the three-year version. That's the whole trade in one line: lower payments, dearer loan, every single time. Pick the shortest term that leaves your monthly budget honest, and if the loan is for a car, check whether the dealer finance or the personal loan wins after any deposit contributions, because the answer swaps around more than people expect.
Loans in context
A personal loan at 8.9% is expensive money next to a mortgage and cheap money next to a credit card at 22%. If you're carrying several balances, the debt consolidation calculator tests whether one loan beats the pile, and if you have spare cash and a loan at the same time, the pay debt or invest calculator settles which use of the money wins. For the borrowing that buys a house rather than a sofa, the mortgage calculator runs the same arithmetic at a different scale.
Common questions
How does the loan calculator work?
Enter the amount, the interest rate (APR) and the term, and it shows your monthly repayment and the total interest using the standard amortising-loan formula.
What is APR and why does it matter?
APR is the yearly cost of a loan including interest and most fees. Comparing loans by APR, rather than by the monthly payment alone, shows which is genuinely cheaper.
Does a longer term cost more?
Yes. Spreading a loan over more years lowers each payment but increases the total interest, because you owe the balance for longer.
These results are estimates for general information only and are not financial advice. Check every figure yourself and seek appropriate advice from a qualified professional before making any decision. Read the full disclaimer.