20 000 over five years at 7.9%
The rate per month is 7.9% ÷ 12 = 0.6583%, over 60 payments. The payment is about 404 per month.
Total repaid is roughly 24 250, so the loan costs about 4 250 in interest — a little over 21% of the amount borrowed.
Loan calculator
Enter what you are borrowing, the rate and the term. You get the payment, the total interest, the full schedule and — if you enter a fee — the real annual rate that makes offers comparable.
This is an estimate for information only. It is not an offer of credit and does not replace the figures disclosed by a lender.
Result
Fill in the fields to see your result.
How it works
A personal or car loan is an annuity: a fixed payment repeats until the balance reaches zero. Each payment covers the interest accrued since the last one, and the remainder reduces the principal. Unlike a mortgage, the compounding frequency almost always matches the payment frequency, so the rate per period is simply the annual rate divided by the number of payments.
The number that actually matters when comparing offers is not the payment — it is the total repaid, and the real annual rate once fees are counted. Lengthening the term always lowers the payment and always raises the cost. A headline rate of 6% with a large arrangement fee can easily be worse than 7% with none.
That is why this calculator separates two things a lender often blurs: the amount amortised, and the cash you actually receive. If the fee is added to the loan you pay interest on the fee as well; if you pay it separately, you receive less than you borrow. Either way, the real annual rate is computed from what you receive against what you repay.
Formulas used
Payment
P = L × i ÷ (1 − (1 + i)^−n)
- L
- amount amortised, fees included if financed
- i
- annual rate ÷ number of payments per year
- n
- total number of payments
Real annual rate
find r such that cash received = Σ payment ÷ (1 + r)^k
There is no closed form: the rate is found numerically, which is exactly what a lender’s disclosure does.
Worked examples
The same loan with a 600 fee added
The amount amortised becomes 20 600 and the payment rises to about 416, but you still only receive 20 000.
The real annual rate climbs above 9%. The advertised 7.9% describes the loan the lender wrote, not the deal you got.
Assumptions and limits
- The rate is fixed for the whole term.
- Compounding matches the payment frequency, which is the usual convention for consumer credit.
- Payments are made at the end of each period.
- Optional insurance and late fees are not included.
Frequently asked questions
Why is my payment different from the lender’s quote?
Usually because of fees folded into the loan, an odd first period, or insurance sold alongside the credit. Add any financed fee to the amount and the figures normally line up.
Should I choose a longer term to lower the payment?
Only if the payment is genuinely unaffordable. A longer term reduces the payment and increases the total interest, because you owe the money for longer. Try both terms here and compare the total repaid, not the monthly figure.
Does paying extra each month really help?
Yes, and more than most people expect. Every extra amount goes straight to the principal, so all the interest that balance would have generated disappears with it. The effect is largest early in the loan, when the balance — and therefore the interest — is highest.
Check your contract first: some loans limit prepayment or charge for it.
What is the difference between the nominal rate and the real annual rate?
The nominal rate applies to the balance. The real annual rate, often published as an APR or TAEG, includes compulsory fees and reflects what the credit truly costs. Two loans with the same nominal rate can have very different real rates.
Updated
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