How is a loan repayment calculated?

Loan repayments use the reducing balance method: each month, interest is charged on the remaining balance, then your payment reduces the principal. The formula is M = P[r(1+r)^n]/[(1+r)^n-1], where P is the loan amount, r is the monthly interest rate, and n is the number of payments.

What is the difference between APR and the interest rate on a loan?

The interest rate is the cost of borrowing the principal. APR (Annual Percentage Rate) includes the interest rate plus all fees and charges, giving the true annual cost of the loan. Always compare loans using APR — a lower interest rate loan can have a higher APR if fees are high.

Should I choose a shorter or longer loan term?

A shorter term means higher monthly payments but much less total interest paid. A longer term lowers monthly payments but dramatically increases total cost. For example, a €15,000 loan at 7% costs €3,240 in interest over 3 years versus €5,640 over 5 years — nearly double.

Can I reduce the total interest on my loan by overpaying?

Yes. Making extra payments reduces the principal faster, which lowers the interest charged each month. Even paying an extra €50/month on a 5-year €15,000 loan can save hundreds in interest and clear the loan 6–8 months early. Check your loan agreement for early repayment charges first.

What types of loans can this calculator handle?

Our loan repayment calculator works for any fixed-rate reducing balance loan — personal loans, car finance, credit union loans, home improvement loans and more. Enter the loan amount, annual interest rate and term to get your monthly payment and total interest instantly.

💰 Loan Repayment Calculator

Calculate monthly repayments, total interest and amortisation schedule for any loan. Uses reducing balance method per EU Consumer Credit Directive.

Loan Amount (€)

Annual Interest Rate (%)

Loan Term

Loan Type

⚠️ Illustrative only. Actual rates depend on your credit profile, lender criteria and affordability assessment. Not financial advice. Per EU Consumer Credit Directive 2008/48/EC.

How Loan Repayments Work

Personal loans commonly use the reducing balance method, where each month you pay interest only on the remaining balance. Early payments contain more interest; later payments contain more principal. This calculator uses the standard amortisation formula to compute your fixed monthly repayment, total interest paid, and total amount repaid over the loan term.

Understanding APR

The Annual Percentage Rate (APR) is the true annual cost of borrowing, including interest and any mandatory fees. It is the standardised figure lenders must quote across Europe, making it the best basis for comparing loan offers. A loan advertised with a low interest rate but high arrangement fees may have a higher APR than a straightforward loan with a slightly higher rate.

Loan Term vs. Monthly Payment Trade-Off

Extending your loan term reduces your monthly payment but significantly increases the total interest paid. For example, a €10,000 loan at 8% APR costs approximately €203/month over 5 years (total interest: €2,166) but only €109/month over 10 years (total interest: €3,033). Choosing the shortest term you can comfortably afford minimises your overall cost.

Tips to Reduce Loan Costs

Make overpayments when possible — check your lender's early repayment rules first
Shorten the term — a shorter loan costs more monthly but far less in total interest
Improve your credit score before applying to access lower rates
Compare multiple lenders — rates can vary by 3–5% for the same borrower profile
Consider a 0% balance transfer or personal loan consolidation to reduce high-rate debt

Types of Loans

Personal loan — unsecured, fixed rate, fixed term; best for large one-off purchases
Car finance (HP or PCP) — secured on the vehicle; PCP has a balloon payment at the end
Mortgage — secured on property; much longer terms (15–35 years)
Credit card — revolving credit; very high APR if not cleared monthly

Last reviewed: June 2026. Estimates only — confirm exact figures with the relevant authority or a qualified adviser before acting.

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Important Note: This tool is intended to provide estimates and should not be used as a substitute for professional advice. Information generated by these calculators may be incomplete and does not account for all individual circumstances. Always seek the counsel of a certified expert (such as a financial advisor, healthcare provider, or licensed engineer) before taking action based on these results.

Related Calculators

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Mortgage Repayment Calculator — Monthly payments, total interest and full amortisation schedule.
Mortgage Overpayment — See interest and time saved by overpaying monthly or with a lump sum.