How does the Loan Calculator work?
An instalment loan is repaid as an annuity – the payment stays constant. Formula: P = L · i / (1 − (1 + i)−n) with monthly rate i and number of months n.
Background & details
The result gives you three numbers: the monthly payment (what actually leaves your account), the total cost (all payments added up) and the total interest (total cost minus the loan amount). For your decision the key figure is often not the payment but the total interest – it reveals the real price of borrowing.
What values are normal?
For consumer and instalment loans, nominal rates typically run from 3 % to 9 % depending on your credit profile. Car loans are often cheaper, while overdrafts and credit-card debt are far more expensive (10–20 %+). As a rule of thumb, all your monthly loan payments together should stay below 35–40 % of your net income, or daily life gets tight.
Common mistakes
- Looking only at the payment: A low payment over a long term feels comfortable but can cost thousands more in interest.
- Confusing nominal and effective rate: Always compare offers using the effective rate (APR), since it includes fees.
- Ignoring add-on insurance: Payment-protection cover is often bundled into the loan and quietly raises the true cost – price it separately.
Practical tips
Experiment with the term: shorten it by a year or two and watch how much the total interest drops while the payment rises only modestly. Pick the shortest term whose payment you could still cover in a weaker month. Before signing, check whether extra repayments are allowed free of charge – they let you clear the loan faster and save interest if you come into spare cash.
When to use it – and when not
This calculator is ideal for standard annuity and instalment loans with a fixed rate and level payment. For interest-only loans, variable rates, payment holidays or property finance with a fixed-rate period, it gives only a rough guide – use the mortgage calculator or the lender's binding offer instead.