Question 1

How is my monthly loan or mortgage payment calculated?

Accepted Answer

Your monthly payment is calculated using the loan amount, interest rate, and repayment term through standard amortisation. This loan calculator helps you understand how each payment covers both interest and principal, with the interest portion reducing as your balance decreases over time.

Question 2

What is the difference between interest rate and APR?

Accepted Answer

The interest rate is the cost of borrowing expressed as a percentage. APR (Annual Percentage Rate) includes the interest rate plus any mandatory fees or charges. For a straightforward loan with no additional fees, the APR and interest rate are often very similar.

Question 3

Why does the total cost change so much with longer loan terms?

Accepted Answer

Longer loan terms reduce your monthly payment but significantly increase the total interest paid over the life of the loan. Shorter terms have higher monthly payments but save substantially on interest. This calculator shows exactly how much you'll pay in total interest based on your selected term.

Question 4

Can I reduce my monthly payment?

Accepted Answer

You can reduce monthly payments by extending the loan term, reducing the loan amount, securing a lower interest rate, or choosing a different loan product. However, extending the term typically increases the total amount of interest you'll pay. Use this calculator to compare different scenarios and find the best balance for your budget.

Question 5

What happens if I repay my loan early?

Accepted Answer

Many UK lenders allow early repayment, though some may charge an early settlement fee. Repaying early reduces the total interest you pay because interest is calculated on the remaining balance. Check your loan agreement for any early repayment charges before making additional payments.

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