Last updated: 04/01/2021 | Estimated Reading Time: 4 minutes
Before you take out a personal loan, you’ll want to consider how much it will cost you monthly and overall. Our free loan calculator will do the maths for you, working out costs based on the loan amount, interest rate and term length. With this information you can compare loans to find the cheapest and borrow safely, knowing you’ll be able to afford the repayments.
In This Guide:
How much will my loan cost?
When determining if you can afford your loan, you should consider two costs: your monthly bill and the overall cost of borrowing over the entire loan term.
In general, the shorter the term the less you’ll pay overall, but the higher your monthly bills will be. The longer the term, the more you’ll pay in total but your monthly bills might be more affordable. By twiddling the knobs on your calculator you can pinpoint a term length that keeps your loan economical both month by month and in the long run.
To minimise your costs, seek out the lowest APR you can find. But remembered that loan products usually give a representative APR. The lender will give you a personalised rate, based on your credit history. 51% of successful applicants for the loan will be quoted an APR that is at or better than the representative APR.
If you have a poor credit score, you’ll likely be in the 49% who are quoted a higher rate. Before you’ve applied for the loan and received a personalised APR, you can use the representative APR to get a rough idea of what the loan will cost, but be aware those costs may be underestimates.
Extra loan costs
Our calculator doesn’t take into account some other fees that may come with your loan.
The APR accounts for some of these charges, including upfront fees like loan arrangement fees. However, others like penalties for early repayment and late or missed payments aren’t included and can catch you unaware.
- Early repayment: Paying off your loan early can reduce the overall interest you pay, but some lenders will slap you with early repayment fees to offset some of the money they’ll lose in interest if you clear your balance early.
- Late or missed payments: You’ll also typically be hit with fees if you send a payment late or miss it entirely. These charges will be in addition to any extra interest you’ll face if your loan term is extended due to late or missed payments.
Before you take out a loan, read the fine print to see exactly what other charges you might be subject to and under what circumstances.
Types of loan
There are different types of personal loans, with different uses and terms and conditions. Before you commit to a lending product, make sure it’s the right one for you.
- Unsecured loans: Most personal loans are unsecured, meaning they don’t use an asset for collateral. With an unsecured loan, you won’t lose your valuables if you default.
- Secured loans: Some lenders offer secured personal loans, which use an asset like a vehicle or home as security. For instance, a logbook loan is secured against your vehicle. Using an asset as security means you can borrow more, particularly if you have a poor credit score, but these loans are risky. If you default, you can lose the collateral, which may be your vehicle or home.
- Fixed rate loans: Fixed rate loans have an interest rate that remains constant throughout the term of the loan. Personal loans are usually fixed rate and our calculator accurately works out their costs.
- Variable rate loans: Occasionally however personal loans come with variable interest rates, which the bank adjusts in response to wider economic indicators. This means your interest rate and therefore your monthly payments and overall costs can rise over the course of the loan. Our calculator can’t determine what your monthly bills will be months or years into a variable rate loan or your overall cost but it can benchmark what your initial monthly payments will be, at the starting APR.
- Guarantor loans: with a guarantor loan, the borrower nominates a person, usually a family member or close friend, who will be responsible for the payments if they default. A guarantor loan can allow people who would otherwise be rejected access credit. But the guarantor has to be aware of the risks associated with guaranteeing these loans.
How to compare loans
You can use Money Expert to retrieve a list of loans from across the market that would be suitable for you. Simply enter the amount of money you’d like the borrow, the reason you're borrowing, the length of time you need it for and a few personal details about yourself. We’ll search more than 30 lenders and banks and within two minutes return a personalised list of the best loan deals for you.
When deciding between these loans, we recommend you plug their APRs into our loan calculator and see which delivers the lowest monthly bills and overall cost.