Loan Comparison Calculator
Compare two loan offers side by side. See monthly payments, total interest, and total cost to identify which deal is actually cheaper.
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Loan Comparison Guide
What's the difference between Monthly Payment and Total Cost?
A longer loan term reduces monthly payments but increases total interest paid significantly. Loan A: £10,000 at 8.9% over 36 months = £318/month, total interest £1,437. Loan B: £10,000 at 6.5% over 48 months = £238/month, total interest £1,406. Loan B has lower monthly payments AND lower total interest — it is clearly better. But this often is not the case: lower monthly payments usually come with higher total cost over time.
What do I need to know about APR Is the Comparison Standard?
Always compare APR (Annual Percentage Rate), not just nominal interest rate. APR includes fees and charges. A loan at 8% with a £300 arrangement fee may have a higher APR than a loan at 9% with no fees, depending on the term. UK law requires all consumer credit advertisements to show the representative APR — this is the rate offered to at least 51% of approved customers. Your personal rate may be higher.
What should I know about The True Cost of a Longer Term?
Extending a loan from 3 to 5 years on £10,000 at 9%: Monthly payment drops from £318 to £208 (saving £110/month). Total interest rises from £1,437 to £2,478 (paying £1,041 more). The 'affordable' monthly option costs £1,041 more in total. For car finance, credit cards, and personal loans, always calculate total cost rather than focusing only on monthly payments — lenders know monthly payment focus leads to higher-cost products.
When to Choose a Longer Term?
A longer term (and lower monthly payment) is justified when: the monthly payment of the shorter term would genuinely stress your budget or prevent you maintaining an emergency fund. You have other high-interest debt to pay off first (avalanche method). You are investing the monthly payment difference at a higher return than the loan rate (rare for personal loans). For most consumer loans, the shorter affordable term is the financially optimal choice.
What's the key thing to understand about Fees Hidden Outside the APR?
APR is designed to capture the total cost of credit including most fees, but not every cost associated with a loan is guaranteed to be baked into the headline APR figure shown in advertising, and some fees are charged separately at specific points rather than spread across the loan. Arrangement or product fees, early repayment charges, missed payment fees, and — for secured loans — valuation or legal fees can all add real cost that's worth checking individually rather than assuming the lowest-APR offer is automatically the cheapest overall. A loan with a slightly higher APR but no arrangement fee and no early repayment charge can work out cheaper in total than a lower-APR loan with a large upfront fee, particularly if you expect to repay early or might need to remortgage or refinance before the term ends. When comparing offers, ask for (or calculate) the total amount repayable over the exact term you expect to keep the loan, including every fee, rather than relying on the APR percentage or the monthly payment figure in isolation.
What do I need to know about Fixed vs Variable Rate Loans?
A fixed-rate loan locks in the same interest rate for some or all of the term, so your monthly payment stays predictable regardless of what happens to wider interest rates — useful for budgeting, but it means you won't benefit if rates fall after you've borrowed. A variable-rate loan's interest rate can move up or down over the term, usually tracking a base rate set by the central bank or the lender's own standard variable rate, so your payment can rise or fall during the loan. For shorter-term borrowing or in a period of expected rate cuts, variable rates sometimes offer a lower starting cost; for longer-term borrowing, or when rates are expected to rise or are already low, fixing removes the risk of payments increasing unexpectedly. When comparing a fixed and a variable offer, check not just today's rate but how much a variable rate could realistically rise given recent history, and whether your budget could comfortably absorb that increase — a decision that looks cheaper today under a variable rate can become the more expensive option if rates move against you during the term.
Early Repayment Charges: The Hidden Cost That Doesn't Show in the Headline Comparison
Two loans compared purely on monthly payment, total cost, and APR can still differ substantially in a scenario the comparison often misses: what it costs to pay the loan off early. Many personal loans and most fixed-rate mortgages include an early repayment charge, sometimes a flat fee, sometimes a percentage of the remaining balance, or sometimes calculated as a fixed number of months' interest, that applies if the loan is settled ahead of schedule, whether through a lump sum, a remortgage, or paying off the balance when selling an asset the loan was secured against. A loan with a slightly higher advertised rate but no early repayment charge can end up considerably cheaper than one with a lower headline rate but a steep early repayment penalty, for anyone who ends up repaying before the full term, whether through choice, a windfall, or a change in circumstances that makes clearing the debt attractive. Because early repayment charges are rarely highlighted as prominently as the headline rate or monthly payment figure, checking the specific terms on overpayments and early settlement, not just the APR and monthly cost, is particularly important for borrowers who think there's a realistic chance they'll want to clear the loan ahead of schedule.
Worked Example: Lower Rate, Longer Term vs Higher Rate, Shorter Term
Two loan offers for £15,000: Loan A has a 7.9% APR over 5 years, Loan B has a 9.5% APR over 3 years. Loan A's monthly payment works out to roughly £303/month, totalling about £18,180 repaid over the full term — about £3,180 in total interest. Loan B's monthly payment is higher, roughly £480/month, but because it's repaid in under 3 years, the total repaid is about £17,280 — only about £2,280 in total interest, despite the higher headline rate. The longer term on Loan A, even at a lower rate, ends up costing about £900 more in total interest because the balance stays outstanding and accruing interest for nearly two extra years. This is the core lesson behind comparing total cost, not just the monthly payment or the APR individually: a lower rate over a longer term can easily cost more overall than a higher rate over a shorter one, especially when the term difference is large.
How Total Interest Scales With Loan Term
| Loan Term | Illustrative Monthly Payment (£15,000 at 8% APR) | Illustrative Total Interest Paid |
|---|---|---|
| 2 years | ~£678 | ~£1,275 |
| 3 years | ~£470 | ~£1,920 |
| 5 years | ~£304 | ~£3,240 |
| 7 years | ~£234 | ~£4,655 |
These figures are illustrative at a fixed example rate to show the pattern — actual quotes depend on your credit profile, the lender, and current market rates, but the underlying relationship (longer term = lower monthly payment but meaningfully more total interest, even at an identical rate) holds generally across personal loans.
Frequently Asked Questions
Is APR always a fair way to compare two loans?
APR is designed to bundle the interest rate and most standard fees into one comparable figure, which makes it a good starting point. However, it typically assumes the loan runs its full term, so it doesn't capture things like early repayment charges that only bite if you pay off early, which can still make an apparently cheaper APR loan more expensive in your actual use case.
Why would anyone choose the shorter-term, higher-rate loan if the monthly payment is harder to afford?
Purely on total cost, a shorter term is often cheaper even at a higher rate, as shown in the worked example. But affordability of the monthly payment is a real constraint too — a loan that's technically cheaper overall isn't useful if the monthly payment doesn't fit the budget, so the choice is a genuine trade-off between monthly affordability and total cost.
Do fixed and variable rate loans get compared fairly on the same APR figure?
A fixed-rate APR is a reliable fixed figure for the loan's life. A variable-rate loan's quoted APR is typically based on the current rate and can change if the underlying reference rate moves, so comparing a variable-rate APR directly to a fixed-rate APR tells you the starting comparison only, not a guaranteed lifetime comparison.