Loan Calculator

A lender's advertised interest rate describes only the cost of borrowing the principal itself, while the APR (annual percentage rate) is a broader, regulated figure that also folds in mandatory fees — origination charges, certain administrative costs — required to obtain the loan, expressed as a single annualised percentage that is meant to be directly comparable across different lenders and offers. Two loans quoting the identical interest rate can have meaningfully different APRs once their respective fees are accounted for, which is precisely why the APR, not the advertised rate, is the correct number to enter here for a realistic total-cost comparison — using the bare interest rate systematically understates what will actually be paid over the life of the loan.

Stretching the same loan amount over a longer term lowers the monthly payment, which is the number most people focus on when comparing offers side by side, but it does so by extending the period over which interest accrues on a balance that falls more slowly each month — the total interest paid over the full term is very often substantially higher on the longer loan, even at an identical rate. Comparing loan offers by monthly payment alone systematically favours whichever option is longest, since a longer term nearly always produces a smaller monthly number; comparing by total interest paid over the full term reveals the actual cost difference that the monthly figure alone conceals.

Every additional amount paid beyond the scheduled minimum applies entirely against the outstanding principal, with no portion of it consumed by interest the way a normal payment is split — this is what makes overpayments disproportionately effective compared to their apparent size. Reducing the principal balance early also reduces the base on which every subsequent month's interest is calculated, so a modest, consistent overpayment compounds into meaningfully reduced total interest and a materially shorter payoff timeline, an effect that is easy to underestimate from intuition alone but becomes concrete once run through the actual numbers.

Some loan agreements include a clause penalising repayment ahead of the original schedule, specifically because the lender priced the loan expecting to collect interest over the full agreed term, and an early payoff or heavy overpayment shortens that expected revenue. Where such a clause exists, it can partially or fully offset the interest savings this calculator projects from overpaying, which is why the actual loan agreement is worth checking directly before committing to an aggressive overpayment strategy based purely on the numbers shown here — this tool has no way to know whether a specific loan carries that restriction.