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Loan Interest Calculator — Simple & Compound Interest

See exactly how much interest a loan will cost. Enter the amount borrowed, the rate and the term, then compare simple interest, compound interest and normal monthly repayments side by side. Add an arrangement fee to see the total cost of borrowing, and compare your rate with others.

How to use the Loan Interest Calculator

  1. Enter the amount borrowed, the yearly interest rate and the term.
  2. Choose simple interest, compound interest or monthly repayments, and how often compound interest is added.
  3. Optionally add an arrangement fee and a second rate to compare.
  4. Read the interest, total borrowing cost and the comparison tables.

Simple vs compound interest

Simple interest is charged only on the original amount: £10,000 at 6% simple interest costs £600 a year. Compound interest is charged on the amount plus the interest already added, so it grows faster — the more often it is added, the higher the total.

Most consumer loans are repaid monthly, so interest is charged on a shrinking balance and the total interest is lower than for either lump-sum method. The calculator shows all three so you can see the difference.

Total cost of borrowing

The total cost of borrowing is the interest plus any fees. Comparing offers by their monthly payment alone can hide higher fees or a longer term, so look at the total amount repayable.

Use the rate comparison table to see how much a one or two point difference in rate adds to the cost, and whether paying a fee for a lower rate is worthwhile.

Assumptions & important information

  • Simple and compound interest assume nothing is repaid until the end of the term. Monthly repayments use the standard instalment formula with the yearly rate divided by 12.
  • Compound interest is added at the frequency you choose; daily compounding uses 365 days.
  • Fees are added to the total borrowing cost but do not accrue interest.
  • Interest rates shown in the form are examples only, not current market rates. Enter the rates from your own quote.
  • This calculator gives estimates for information only. It is not financial advice and not a mortgage or loan offer. Rates, fees and lender criteria vary, so check the details with your lender or a regulated adviser. Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.

Ideas & examples

  • £10,000 at 6% for 3 years: Simple interest is £1,800.00, compound interest added monthly is £1,966.81, and a loan repaid in monthly instalments costs £951.90.
  • Adding a fee: A £250 arrangement fee on a £10,000 loan adds £250 to the cost of borrowing. Enter the fee to see the total.
  • Does a 1% lower rate matter?: Use the comparison table to see exactly how much interest you would save at a lower rate over the same term.

Frequently asked questions

How do I calculate loan interest?

For simple interest, multiply the amount by the yearly rate and the number of years. For compound interest, use the amount × (1 + rate ÷ periods)^(periods × years) and subtract the original amount. The calculator does both for you.

What is the difference between simple and compound interest?

Simple interest is calculated only on the original loan. Compound interest is calculated on the loan plus interest already added, so it costs more over longer periods.

Which method do loans use?

Most UK personal loans and mortgages use monthly repayments, where interest is charged on the remaining balance. Simple and compound figures are useful for comparisons, savings and some short-term lending.

How can I reduce the interest I pay?

Borrow for a shorter term, secure a lower rate, make overpayments if allowed, and avoid unnecessary fees.

Does this include fees?

You can add an arrangement fee. It is added to the total borrowing cost but does not change the interest calculation.

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