The formula
How to calculate total loan cost
The total cost of a loan is what you repay across the whole term plus any fees, and it is the number worth deciding on. A monthly payment tells you whether you can afford it; the total tells you what it costs.
Each payment covers the interest accrued that month first, with the remainder reducing the balance. Because the balance falls, the interest share shrinks and the principal share grows even though the payment stays flat.
What to enter:
- Amount borrowed
- Interest rate (% APR)
- Term (years)
- Fees
Everything recalculates as you type, and the numbers in the address bar update with it, so a link to this page carries your figures with it.
Where a figure is not immediately to hand — a precise interest rate, an exact balance — a reasonable estimate is a perfectly good starting point. Because every result updates instantly, refining a rough guess into the real figure once you have it takes a moment, and nothing about the calculation depends on getting it exactly right on the first attempt.
Why total loan cost matters
Most people who look up a total loan cost calculation already have a specific number in mind — a quote, an offer, a target — and want to check it rather than learn the theory behind it. This page is built for that: enter your own figures, see the result immediately, and change any field to see how the answer moves without redoing the arithmetic from scratch each time.
Beyond a one-off check, the same calculation is worth revisiting whenever the underlying numbers change — a new interest rate, a change in income, a different term. Because the figures live in the page's own web address, coming back to update just one field and compare the new result against the old one takes seconds rather than starting again from a blank page.
The reason a page like this exists at all, rather than leaving the calculation to a spreadsheet or a textbook appendix, is that the formula behind total loan cost is fiddly enough to get wrong by hand but not complicated enough to need specialist software. That middle ground — real enough maths to matter, simple enough to check instantly — is exactly what a dedicated calculator is for, and it is why the same figure recalculated here should match a careful manual calculation almost exactly.
Where the same calculation needs to be run for several different scenarios side by side — three loan offers, two savings plans — the fastest approach is usually to open the calculator in a second browser tab for each one, so that the results can be compared directly rather than overwriting each other in a single set of fields.
Worked example
Here is the calculation with the starting values:
- Amount borrowed: 15,000
- Interest rate: 7.9 % APR
- Term: 5 years
- Fees: 0
That gives:
- Monthly payment: 303.43
- Total cost including fees: 18,205.71
- Interest and fees paid: 3,205.71
These figures are only the calculator's own starting values, included so the working is visible rather than hidden inside the tool above. Replace them with your own numbers and the same arithmetic applies — nothing about the method changes, only the inputs feeding it.
Reading the result
Term dominates the total. £15,000 at 7.9% costs about £3,200 in interest over five years and roughly double that over ten, for a payment barely £100 lower.
Where this goes wrong. Judging a loan on the monthly payment alone. Lenders quote monthly figures because they are the easiest number to make look small, and lengthening the term always does it.
A useful check on any unfamiliar result is to compare it against a rough mental estimate first — round the inputs to convenient numbers and see whether the calculator's answer lands in roughly the same territory. A wildly different figure usually means one of the fields was entered in the wrong unit, most often a percentage typed as a whole number where a decimal was expected, or the reverse.
Substantially. Overpayments go straight to principal, so all the interest that balance would have accrued disappears. Check for early repayment charges, which on regulated consumer loans are capped at 58 days' interest.
If the payment is comfortably affordable, yes — it costs less overall. Some borrowers prefer a longer term with regular overpayments, which gives the same result while keeping the contractual payment low as a safety valve.
The headline figure is monthly payment. With 15,000 amount borrowed, 7.9 % APR interest rate and 5 years term, that comes to 303.43. Change any field and the figure moves with it.
Whenever one of the underlying figures changes — a new interest rate, a different balance, an updated term — since the result only reflects what is currently in the fields. There is no need to keep a separate record of past results; the web address for a filled-in version already carries the figures used to produce it.
Not unless a tax rate or a fee is explicitly one of the inputs above. Where it is not, the figure shown is a gross calculation, and any tax due depends on your personal circumstances and current tax rules, which are worth checking separately.
The arithmetic itself is exact — the calculator applies the formula shown above precisely, with no rounding until the final figure is displayed. The uncertainty, where it exists, is entirely in the inputs: an estimated rate or an approximate balance carries that same approximation through to the result.