Quick brief
What to know before you calculate
A short read on the assumptions, trade-offs and definitions that shape the answer.
- Fees added to a loan balance can increase both payment and interest.
- Extra monthly payments usually reduce interest when they reduce principal early.
- Check whether the lender allows overpayments without penalties.
Look beyond the headline payment
A monthly payment is useful, but total interest and total repaid tell the fuller story. Two loans with similar payments can have different total costs if one has a longer term, higher rate or fees added to the balance.
Understand fees
A fee paid upfront is different from a fee added to the loan. When a fee is added to the balance, interest may be charged on it. That can make the real cost higher than the fee amount shown at the start.
Model overpayments carefully
Extra monthly payments can reduce the balance faster and lower total interest. The effect is usually strongest when overpayments start early. Before relying on the saving, check whether the lender limits overpayments or charges early repayment fees.
Use APR for comparison
APR can help compare loans because it includes interest and certain fees in a standardised annual rate. It still needs to be read with the term, total amount payable and flexibility, especially if you may repay early.
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