Finance Charge Calculator
Calculate total finance charges and interest on any loan.
What this calculator does
This calculator shows the total cost of borrowing in pounds rather than as a percentage. Enter the amount, the interest rate, the term in years, and any overpayment, and it returns the monthly repayment, the total interest charge across the agreement, the total amount repayable, and how much an overpayment removes.
Costs stated in pounds read very differently from costs stated as rates. A 12.9 percent APR is abstract; £2,007 of interest on a £9,500 loan is a figure you can weigh against what the money is for. UK credit agreements must disclose both the total charge for credit and the total amount payable for exactly that reason.
When to use it
Use it before you commit to a term, since the term determines the charge more than anything else you control. Lenders present 60 and 84-month options because the monthly figure looks better, and only the total charge reveals what those extra years cost.
It is also the tool for weighing whether a purchase justifies its financed price. A £4,000 sofa on a five-year finance deal is not a £4,000 decision. And it works as a check on the paperwork: if the total charge for credit shown on your agreement is well above what the rate and term produce here, there are fees in the deal worth asking about.
Understanding the inputs
Loan amount is the capital advanced. Interest rate should be the APR you have actually been offered following an eligibility check rather than the representative rate from the advert, which only 51 percent of accepted applicants need to receive.
Loan term in years is the input that drives the charge hardest — the same balance over six years rather than three typically more than doubles the interest, because you hold the money longer and repay capital more slowly. The extra monthly payment field models overpayments applied to the capital, which you have a statutory right to make under the Consumer Credit Act.
How is this calculated?
Monthly Payment = P[r(1+r)^n]/[(1+r)^n-1]. Finance Charge = (Monthly Payment × n) − Loan Amount.
A worked example
Take a £9,500 loan at 12.9 percent over three years. The monthly repayment is about £320, and the interest charge across the agreement comes to roughly £2,007, so the total repayable is around £11,507.
Stretch the same £9,500 to five years and the repayment falls to about £216 — £104 a month easier. But the interest charge rises to roughly £3,440, an increase of about £1,433. Those two additional years cost £1,433 in interest, which is the true price of the lower monthly figure. Add any product fee on top to reach the total charge for credit your agreement will state.
Limitations and assumptions
The calculator computes interest alone. The total charge for credit on your agreement also includes any compulsory arrangement or product fee, so the disclosed figure will be higher wherever fees apply. Late payment charges, default fees, and optional insurance are excluded.
It assumes a fixed rate, monthly compounding, on-time payments throughout, and no early settlement. Lenders that calculate interest daily will produce slightly different totals, and settling early triggers a rebate calculated under the Early Settlement Regulations that this does not model. The pre-contract credit information is the authoritative document.
Common Questions
- What is the total charge for credit?
- The UK term for the total cost of borrowing in pounds — interest plus compulsory fees — as distinct from the APR, which expresses it as a rate. Under the Consumer Credit Act your agreement must state both the total charge for credit and the total amount payable before you sign.
- Is the total charge for credit the same as total interest?
- Only on a fee-free loan. Where an arrangement or product fee applies, the total charge for credit includes it while total interest does not. This calculator shows the interest component, so add any compulsory fee to arrive at the figure that will appear on your credit agreement.
- Why is the charge so large compared with the amount borrowed?
- Because interest accumulates over the whole term while the payment is spread across it and feels routine. A £9,500 loan at 12.9 percent over three years carries about £2,007 in interest — 21 percent of the amount borrowed. Push it to five years and the charge climbs to roughly £3,440.
- How is interest charged on a UK credit card?
- Usually on the average daily balance across the statement period, using a daily rate derived from the APR. Because it works on daily balances, paying part way through the cycle reduces the charge, and paying the statement balance in full each month means the interest-free period keeps the charge at zero on purchases.
- Can I reduce the charge by repaying early?
- Yes. Under the Consumer Credit Act you have a statutory right to settle early and to a rebate of future interest, calculated under the Early Settlement Regulations. On agreements running longer than twelve months the lender may retain up to 58 days' interest as compensation, so the saving is slightly less than the full remaining interest.
- What happens to the charge if I miss a payment?
- It grows. Default charges are permitted but must reflect the lender's actual costs, and the FCA has pushed the standard down to around £12 for card and loan late fees. Interest also continues on the higher balance, and the missed payment is recorded on your credit file for six years.
- Do I have to pay a fee to settle a loan early?
- Not a fee as such, but the lender may keep up to 58 days' interest on agreements over twelve months, or 30 days on shorter ones. Ask for a formal settlement figure — it will be lower than the sum of your outstanding instalments, and comparing the two shows exactly what settling saves.
- Where is the charge shown on my agreement?
- In the pre-contract credit information and the credit agreement itself, both required under the Consumer Credit Act. Look for the total charge for credit and the total amount payable. If either differs from what the rate and term imply, there are fees in the deal you have not been told about.