How this tool works
Works out the monthly instalment on a loan from the amount borrowed, the annual interest rate and the term, and shows the total interest and total repayment alongside it.
The standard amortisation formula produces a payment that clears both interest and capital in equal instalments across the term. The composition of that payment shifts as it goes: early instalments are mostly interest because the outstanding balance is large, and late ones are mostly capital. The amount you pay never changes, which is why the split is invisible unless you look at a schedule. A fixed rate for the whole term is assumed, and fees, insurance and any charge added to the balance at drawdown are outside the calculation entirely.
Reading the total, not the instalment
- A longer term always lowers the instalment and raises the total: the balance is outstanding for longer, so more interest accrues. The affordable monthly figure and the cheapest loan are rarely the same loan.
- Early payments are mostly interest: which is why paying a loan off in its first years saves more than the same overpayment later.
- Fees sit outside this figure: processing and arrangement fees, and anything added to the balance at drawdown, change the real cost. Compare on APR.
- A variable rate is not modelled: the calculation assumes the rate holds for the full term. A tracker or a fix that reverts to a standard rate will not behave like this.