Personal Loan Calculator

About the Personal Loan Calculator

There is one thing about personal loans that catches almost everyone, and it is not the interest rate.

It is the origination fee — and specifically that it comes out of the money you receive, not added to what you owe. Borrow £10,000 with a 6% fee and £9,400 lands in your account. You then repay interest on the full £10,000. You are paying for the use of £600 you never had.

That is why a personal loan quoted at 12% can cost the same as one quoted at 16%, and why comparing offers on their headline rates is close to meaningless. This calculator gives you the payment, the cash that actually arrives, and the APR that the fee creates.

How to Use the Personal Loan Calculator

Enter the amount borrowed — the figure that will appear on the agreement, not what you need in hand. Those are different numbers, and the calculator will tell you the gap.

Add the annual interest rate and the term in months.

Then the origination fee. It is usually between 1% and 10%, and lenders frequently set it by credit grade, so the borrowers offered the highest rates also tend to be charged the largest fees. Set it to zero if your lender genuinely does not charge one.

How the Fee Changes Everything

Two quantities that most people assume are the same thing are not:

What you repay is based on the full loan amount. £10,000 at 12% over 36 months is £332.14 a month, whether the fee is 0% or 10%.

What you received is the loan amount minus the fee. With a 6% fee, £9,400.

The APR is the rate that connects those two — the rate at which 36 payments of £332.14 are worth exactly £9,400 today. On these figures it is 16.36%, against a quoted rate of 12%.

The fee added 4.36 percentage points to the real cost of the loan. That is more than the entire gap between a good credit grade and a mediocre one.

The Formulas

The payment comes from the standard annuity formula, applied to the full amount:

             r
  P = A × ─────────
          1 − (1+r)⁻ⁿ

  A = the full loan amount
  r = annual rate ÷ 12
  n = number of monthly payments

The APR is the same equation solved backwards — but for r, against the cash you received rather than the amount borrowed:

  find r such that:   9,400 = 332.14 × (1 − (1+r)⁻³⁶) ÷ r

There is no rearrangement that isolates r. None exists. Every calculator that reports an APR finds it by trial, narrowing a range until the payments match. This one says so in the working rather than implying an algebraic step it does not have.

Why a Lower Rate Can Cost More

This is the comparison the fee makes possible, and it is not a contrived one — both of these are ordinary personal loan offers.

£10,000 over 36 months:

Offer A looks like the cheapest money on the table. It is not. Offer B, advertised at two full points higher, costs £361.95 less.

And notice D against C: a 15% loan with a 1% fee costs almost exactly what a 12% loan with a 6% fee costs. Three points of rate, cancelled by five points of fee.

The rule that falls out of this is simple. Compare APRs. Never compare rates.

Step-by-Step Example

£10,000 at 12% over 36 months, with a 6% origination fee.

  Monthly rate:  12% ÷ 12 = 1%
  Payment:       10,000 × 0.01 ÷ (1 − 1.01⁻³⁶) = 332.14

  Fee:           6% of 10,000              =   600.00
  Received:      10,000 − 600              = 9,400.00

  Total repaid:  36 × 332.14               = 11,957.18
  Interest:      11,957.18 − 10,000        =  1,957.18
  True cost:     11,957.18 − 9,400         =  2,557.18

The first payment, split:

  Interest:  10,000 × 1% = 100.00
  Principal: 332.14 − 100.00 = 232.14

Note that the interest is charged on £10,000 from month one, not on the £9,400 you actually have.

If you need £10,000 in hand, you cannot borrow £10,000. You have to borrow:

  10,000 ÷ (1 − 0.06) = 10,638.30

Because the fee is charged on the larger figure too. That is a detail worth catching before you apply for the wrong amount.

Understanding Your Result

The monthly payment is what you will pay, calculated on the full loan amount.

What you receive is the cash that actually arrives, after the fee.

The true APR is the figure to use when comparing offers. If it differs from the rate, the fee is the difference.

Cost of the credit is everything you repay minus everything you got. It is a larger number than "total interest" whenever there is a fee, and it is the more honest one.

Worth knowing carries the points the fee added and the gross-up you would need to net your target amount.

When Should You Use This Calculator?

Comparing two or more offers. This is the main use. Put each into the calculator and compare the APRs, not the rates.

Before applying for a specific amount. If you need a precise sum — to clear a debt, to cover a bill — you must borrow more than that sum. Work out how much first.

Checking a lender's APR. If theirs differs from this, the gap is other compulsory charges, a different fee structure, or a different compounding convention, and it is worth asking which.

Deciding whether the loan is worth it at all. Seeing the cost of the credit as a single figure — £2,557 to borrow £9,400 — makes the decision clearer than a monthly payment does.

Weighing a personal loan against a credit card. Cards have no origination fee but usually much higher rates. The comparison is only fair on APRs.

Common Mistakes

Comparing interest rates rather than APRs. The table above is what this costs. A lower rate with a heavy fee is regularly the more expensive loan.

Assuming the fee is added to the balance. It is deducted from the payout. You repay the full amount either way, so the fee is pure cost with no offsetting benefit.

Borrowing exactly what you need. After the fee you will be short. Gross it up.

Ignoring the term. A longer term lowers the payment and raises the total, exactly as with any loan. The fee is a separate problem stacked on top of that one.

Forgetting that the fee is sunk immediately. If you repay the loan early you recover unused interest but never the origination fee, which makes early repayment less attractive on a heavily-fee'd loan than on a clean one.

Treating the advertised rate as your rate. Personal loan rates are credit-graded and the advertised figure is usually the best available. Both the rate and the fee you are offered may be worse.

Reading this as a quote. Every figure here is an estimate for planning. A lender assesses affordability and credit history and may offer different terms or decline.