Loan Repayment Calculator UK

For equal instalment (annuity) loans, the monthly payment is calculated using the formula: M = P * [r(1+r)^n] / [(1+r)^n - 1], where P is the principal, r is the monthly interest rate (annual rate / 12), and n is the number of months. This ensures every payment is the same amount throughout the loan term, with the proportion going to interest decreasing over time.

With equal instalments (repayment), each monthly payment covers both interest and a portion of the principal, so the loan is fully repaid by the end of the term. With interest-only, you only pay the interest each month and the full principal remains outstanding at the end of the term. Interest-only has lower monthly payments but you must repay the capital as a lump sum or refinance.

An amortisation schedule is a table showing every payment over the life of a loan, broken down into the interest portion and the principal portion. Early payments are mostly interest, while later payments are mostly principal. This schedule helps you see exactly how much of each payment reduces your debt versus paying interest to the lender.

Yes, making overpayments reduces the outstanding principal faster, which means less interest accrues. Even small regular overpayments can significantly reduce total interest paid and shorten the loan term. Most UK personal loans allow overpayments, but check for early repayment charges (ERCs) which are capped at 1 month of interest for loans under the Consumer Credit Act.

As of 2024/25, typical UK personal loan rates range from about 3% to 7% APR for borrowers with good credit scores on loans of £7,500-£15,000. Smaller loans (under £3,000) often attract higher rates of 10-30%. Very large loans may also carry higher rates. Your rate depends on your credit score, loan amount, term length and the lender.

APR (Annual Percentage Rate) includes the interest rate plus any mandatory fees and charges, giving a truer picture of the total cost of borrowing. The flat interest rate may appear lower, but APR accounts for compounding and fees. In the UK, lenders must show the representative APR, which at least 51% of accepted applicants will receive.

Yes, but interest rates will be significantly higher. Specialist lenders offer loans to people with poor credit histories, but rates can be 30-70% APR or more. Consider alternatives such as credit unions (which cap interest at 42.6% APR), secured loans, or guarantor loans. Improving your credit score before applying will help you access better rates.

UK personal loans typically run from 1 to 7 years. Shorter terms mean higher monthly payments but less total interest paid. Longer terms reduce monthly payments but increase total cost. A good rule is to choose the shortest term you can comfortably afford. For car finance, matching the loan term to how long you plan to keep the vehicle is sensible.

Missing a payment can result in a late fee (typically £12-£25), a negative mark on your credit file that stays for 6 years, and potentially higher interest rates. If you miss multiple payments, the lender may issue a default notice. Contact your lender before missing a payment — they may offer a payment holiday or reduced payment plan.

Personal loan interest is not tax deductible. However, if you borrow for business purposes (e.g. a business loan or using a personal loan for allowable business expenses), the interest may be deductible against business profits. Buy-to-let mortgage interest has restricted tax relief since 2020, replaced by a basic rate tax credit.