Loan Repayment Calculator

Enter the amount, the annual rate and the term to get the monthly instalment, the total interest and a month-by-month schedule showing where each payment goes. Add an overpayment to see what it removes from the term and from the interest.

The part worth the page, though, is the flat-rate conversion. Asset finance and short-term business lending are routinely quoted as a flat rate, which charges interest on the original amount for every month of the agreement, whether or not the balance has fallen. It is written in the same units as an ordinary rate (a percentage, per year), and it means something close to twice as much.

How much depends on the rate and the term together, and the figures are worth having concretely: over 60 months a 5% flat rate costs the same as 9.15% reducing, and over 36 months the same 5% flat comes to 9.31%. Both numbers come from this calculator, and a test checks them against the annuity formula rather than against a rule of thumb.

This works out the arithmetic of terms you have been offered, in the same way the VAT calculator works out tax. It is not advice about whether to borrow, and nothing you type is transmitted anywhere.

Almost every loan you will meet charges interest on the outstanding balance. You borrow, you make a payment, part of it clears interest for that month and the rest reduces what you owe, so next month's interest is smaller, and the month after that smaller still. That is the reducing-balance arrangement, and it is what a rate normally means.

A flat rate does something different. It calculates the whole interest bill at the start, on the original amount, for the entire term, and then divides the total into equal instalments. In the last year of a five-year agreement you are still paying interest on money you repaid in the first, because the calculation never looked at your balance. Both are quoted as an annual percentage, and nothing in either number tells you which kind it is.

The gap is large and consistently in the same direction. Across the rates and terms businesses actually use, a flat rate converts to between roughly 1.6 and 1.95 times the reducing-balance rate that would cost the same. Where in that range depends on both: the multiple is closest to double at low rates, and falls steadily as the flat rate rises. So a lender quoting 6% flat against a bank's 10% is offering the more expensive deal, by a margin that is invisible unless you convert.

The reducing-balance structure also explains where each instalment goes, which is the other thing the schedule makes visible. Early payments are mostly interest and late ones mostly principal, because interest is charged on a balance that starts large. That is not a fee structure or a trick; it falls out of charging interest on what is owed. It does mean an overpayment early removes interest for every remaining month, while the same amount late removes almost none.

One small thing worth naming, because it looks like an error and is not. The final instalment is almost never identical to the others. A monthly payment is a rounded figure, so it cannot divide the debt evenly, and the last one is whatever clears the balance exactly. Real lenders do the same. A schedule that instead ends at a balance of a few pence either way is one built from floating-point arithmetic that nobody reconciled.

What none of this includes is fees. An arrangement fee, a documentation charge or a broker's commission is a real cost of borrowing and does not appear in an interest rate. That is what an APR is for: it folds the charges into a single comparable figure, which is why a loan's APR sits above its interest rate and why APR is the number to compare when you have it.