How loan repayments are worked out
A personal loan is repaid in equal monthly instalments over a fixed term. Each payment covers the interest due that month plus part of the capital, so the balance reduces steadily until the loan is cleared. The monthly figure depends on the amount borrowed, the interest rate (APR) and the length of the loan.
A longer term lowers the monthly payment but increases the total interest you pay overall. A lower APR reduces both.
Worked example
A £10,000 loan at 7.9% APR over 5 years costs about £202 a month, with roughly £2,140 of interest over the term — a total of about £12,140.
Frequently asked questions
How much would a £10,000 loan cost per month?
At 7.9% APR over 5 years, about £202 a month, totalling around £12,140 with roughly £2,140 of interest.
How are loan repayments calculated?
Using a reducing-balance method: interest is charged on the outstanding balance each month, and a fixed monthly payment gradually pays off the capital.
What is APR?
APR (Annual Percentage Rate) is the yearly cost of borrowing including interest and certain fees. It lets you compare loans on a like-for-like basis.
Does a longer term cost more?
Usually yes. Spreading a loan over more years lowers the monthly payment but increases the total interest paid.
Is the rate I see the rate I'll get?
Advertised “representative” APRs must be offered to at least 51% of accepted applicants; your actual rate depends on your credit profile.