Thinking about taking out a loan? It’s worthwhile knowing roughly how much your monthly payments will be and what the loan will cost you in interest to see if you can afford it.
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See loans available to you
- Find loans without harming your credit score
- Understand chance of approval before applying
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What do I need this loan affordability calculator for?
If you’re thinking about getting a personal loan, you’ll want to be sure that you can afford to pay it back on top of your other regular expenses.
Our calculator can help you work out what your monthly repayments could be, based on what you want to borrow. You’ll also be able to see how the repayments could vary if you opt for, say, a three-year loan instead of a one-year loan.
You can use our loan repayment calculator to quickly play around with different options, whether that’s extending or shortening the loan length, or adjusting the interest rate based on what you think your credit rating is. It means you can see if a loan fits your budget and stress-test your ability to repay it.
How does the loan calculator work?
The calculator works out either how much you’ll have to pay each month or how much you can borrow, based on different variables. These include:
- amount borrowed
- interest rate
- length of the loan
- monthly payments.
If you change any of the variables, the calculator will work it out all over again with the new figures.
The personal loan calculator will give you an approximate guide to what someone with a particular credit rating will get. However, when you apply for a loan, this will be based entirely on your particular circumstances, personal credit rating and the criteria of the loan provider – so may vary a little from the rough guide the calculator provides.
How to use the loan calculator
To see how much your monthly repayments will be:
- Make sure you’re on the ‘What are my repayments?’ tab.
- Enter the amount you want to borrow and for how long – you can either fill in the box or use the slider.
- Select how many years you want to pay back over.
- The average APR is shown but this can be adjusted accordingly, based on whether you have a good or bad credit rating. If you know you’ve got a poor credit score, you’re more likely to be offered a higher APR.
- Check the result – you’ll be able to see how much your monthly repayments will be and how much you’ll pay overall in interest.
- If you want to, you can then see what the difference is if you pay back over a longer or shorter time, or if you’re offered a higher interest rate.
To see how much you can borrow:
- Select the ‘What can I borrow?’ tab.
- Enter the amount you can afford to repay every month.
- Choose the number of years you want to pay back over.
- If you know the Representative APR of a loan you’re interested in, enter it. The average APR is shown but this can be adjusted accordingly, based on whether you have a good or bad credit rating. If you know you’ve got a poor credit score, you’re more likely to be offered a higher APR.
- Check your the result – you’ll be able to see how much you can borrow with an indication of what you’d pay in interest.
- If you want to, you can try experimenting with some of the variables, to see what happens to the total if you pay back for a shorter or longer period, for example.
In either case, you can then check to see how likely you are to be accepted for this sort of loan. Simply select the ‘Check your eligibility’ button, enter a few personal details and you’ll be able to see loans that you’re likely to be accepted for without having an impact on your credit score.
Once you’ve seen the loans you’re likely to be eligible for, you can then apply for one.
You should think carefully about whether you can afford to pay back a loan regularly and on time before you take one out.
How are loan repayments calculated?
Using the amount borrowed and the APR, the interest calculator does the sums and works out what the interest will add up to over the term of the loan. It also works out how much you’d have to pay back every month to pay off the loan in full.
What should I look for when comparing loans?
When looking for a loan, ideally you want the one with the lowest interest rate so you’re not paying more than you need to. Some loans may also charge an arrangement or set-up fee, which could add to the cost of borrowing too.
Also check whether there’s a penalty for paying back the loan early or making overpayments.
What’s the difference between the loan calculator and the loan eligibility checker?
The loan calculator will give you a rough idea of what you’d need to pay back each month for a loan of a particular amount, based on a specific rate of interest - APR. It won’t point you to particular loans.
The loan eligibility checker is more personalised, going a little more deeply into your circumstances to give you an idea of which loans you’re likely to be accepted for, and at what rate of interest. While this will run a check on your credit history, it won't affect your credit rating and lenders can’t see your historic searches, they can only see applications. Using it to find loans won’t affect your credit rating.
The two can work helpfully together. The calculator can be a good starting point, giving you a guide to what your monthly payments could be. But the financial climate means that lenders will weigh up very carefully how likely you are to repay your loan. This is where the eligibility checker can help. It will give you an indication of which loans you’re likely to be approved for.
You can use the eligibility checker in tandem with the calculator – and adjust the calculator based on the results in eligibility checker to evaluate the impact of different options.
Improving loan eligibility
There are a few things you can do to make yourself more eligible for a loan.
- Apply to lenders who are more likely to accept you. Different lenders have different attitudes to risk and different sets of criteria. When you apply for a loan through Compare the Market we carry out a soft search to help you find loans you’re more likely to be accepted for without affecting your credit score.
- Calculate whether you can afford to pay back a loan. Lenders won’t accept you for a loan if they think you can’t pay it back. You can use the calculator to help you see how much you can afford to borrow.
- Improve your credit score. Check whether there’s anything you can do to increase your score, like making sure your name is on the electoral roll. The higher your credit score, the greater chance you have of being accepted for a loan at a lower APR.
- Make sure you’re not connected to someone with bad credit history. If you share a joint account, apply for credit together, or get a joint County Court Judgment against you, then you’re considered to be financially associated with that person, and this will appear on your credit report. In the eyes of lenders, your financial associations can impact your ability to pay back debt, so it can affect whether they’re willing to accept your loan application.
Reducing the cost of a loan
There are several ways you can reduce the cost of a loan.
- Switch loans. There may be other loans available with lower interest rates, or shorter terms which could save you money. However, you’ll always need to look at whether any new loan will work out cheaper overall and whether you can afford to make the repayments if the term is shorter and the payments higher.
- Repay early. You can pay a loan off early, although lenders may charge you an early repayment fee. This fee should be stated in the loan agreement. You can complain to the lender if you think you’re being overcharged.
You must tell the lender you intend to pay the loan off early and they will send you a settlement figure, which will be valid for 28 days from making the request.
- Make extra payments (overpaying). You must give notice to your lender that you plan to overpay, then make the payment within 28 days of letting them know.
Similar to paying off a loan early, you can be charged a fee if you overpay a loan. This should be set out in the agreement. If you took out a loan from February 2011 onwards, you can overpay up to £8,000 extra per year before being charged the fee.
Cancelling a loan
You can cancel your loan agreement during the 14-day cooling-off period if it’s covered by the Consumer Credit Act 1974. These types of loan normally are:
- ‘Buy now, pay later’ agreements
- Credit cards
- Hire purchase
- Payday loans
- Personal loans
- Store cards
- Store finance
Contact the lender in writing to give them notice of the cancellation before the 14 days are up, and keep a copy of your request. You must pay the money back within 30 days of cancellation if you’ve already received it.
Making a complaint against a loan provider
If you feel you’ve been treated unfairly, you can make a complaint. Here’s how to do it.
- Complain directly to the loan provider in writing, and save copies of all your correspondence. The Financial Conduct Authority states that all firms are required to acknowledge your complaint in writing within three working days of receiving it, unless they resolve it within that time.
- The provider should respond to the complaint within eight weeks.
- If you’re not satisfied with your lender’s response, or they don’t respond within the required time, you can complain to the Financial Ombudsman Service. They offer a free service, and will contact the loan provider to ask them what they think happened. You must contact the Financial Ombudsman Service within six months of receiving the final response from the loan provider.
- If you’re not happy with the Financial Ombudsman Service’s decision, you can take your case to court. This is a last resort.
Avoiding loan sharks
A loan shark is a lender who isn’t authorised by the Financial Conduct Authority (FCA) to lend money. If they lend money, they are breaking the law. You can use the FCA’s register to check whether a lender is authorised. All the loans Compare the Market compares are with FCA-registered lenders.
Signs a lender may be a loan shark include:
- Charging high interest rates
- A lack of paperwork or any confirmation of the loan agreement
- Taking away your credit cards
- Threatening violence against you
Contact the police immediately if a lender threatens you.
If you think you owe money to a loan shark, you can contact the advisers below.
|Your location in the UK||Contact details|
Loan sharks deliberately target vulnerable people, but “alternatives to borrowing from loan sharks are available if you are in financial difficulty,” says Tony Quigley from the Illegal Money Lending Team.
There are also options open to people who need loans but aren’t eligible for them:
- Credit unions. A credit union is a financial cooperative which is owned by the people who use its services, and offers a range of products. These can vary between unions, but may include loans, and they are more likely to offer smaller, short-term loans. The most a credit union will charge for a loan is 42.6% APR, but some have been known to charge as little as 5% APR.
- Budgeting loans. Budgeting loans are available to those who have been on specific benefits for six months or more. You only pay back what you borrow (i.e. the loan is interest-free), and this is taken from your benefits automatically. You can apply online through the government website.
Avoiding loan scams
Loan fee fraud has been on the rise over the past few years, according to the Financial Conduct Authority (FCA). This is a scam where someone pretending to be from a loan provider contacts you to offer a loan, and asks for a fee upfront – normally ranging from £25 to £450. They may describe the fee as a refundable deposit and ask you to pay it quickly, then never send the loan you were promised.
To protect yourself from loan scams:
- Check the Financial Services Register to see if the loan provider is registered with the FCA.
- If they are, check that their contact details match what’s on the register. Call the FCA’s consumer helpline if they don’t, or if they don’t have any contact details on the register.
- If a loan provider asks you to pay a fee upfront, check that:
- Their legal name is the same as the one that appears on the Financial Services Register
- They can show you statements that say they are acting as a credit broker and if you need to pay a charge to use their lending services
- They can tell you the fee and how it’s calculated, and when and how it needs to be paid
If they can’t provide any of this information then they are most likely running a scam. You can report them to the FCA.
Understanding your credit score
Your credit score is one of the factors lenders look at when you apply for a loan. A higher score means you’re more likely to be viewed favourably, accepted, and even offered better rates. Your score is based on your credit report – a summary of how you’ve managed credit in the past.
Credit scores are provided by the three main credit reference agencies: Experian, Equifax and TransUnion. Each has a different scoring method, so it’s difficult to generalise about what a “good” credit score is, aside from it being on the higher end of the spectrum.
Before you apply for a loan, it’s a good idea to check your credit report and correct any mistakes as this can help improve your credit score. We offer a free credit score and report, working with Experian.
How is a credit score calculated?
Each credit reference agency has a different way of calculating credit scores, looking at things like your payment history and past debts.
Lenders won’t accept your application if your total score is below their threshold. But they all have different criteria, so just because one lender says your score is too low, it doesn’t mean another one will.
Debt is something most, if not all of us must deal with at some point in our lives. Fortunately, there are some sensible ways you can manage it, allowing you to borrow responsibly and with considerably less stress.
Key UK debt statistics
- The average UK adult is £30,575 in debt, not counting student loans.
- British households racked up a total of £1.28 trillion in debt between April 2016 to March 2018, according to government figures 91% of this was property debt, while 9% was financial debt.
- Household debt levels were at 130.5% of disposable income in Q2 2021. This figure peaked in Q2 2008, when it was 151.5%.
- The percentage of households in the UK with problem debt varies by region. According to the latest figures, the regions with the highest percentage are the North East, North West, Yorkshire & the Humber, and the East Midlands, at 5%.
Borrowing money during COVID-19
Households have borrowed less and saved more during the coronavirus lockdowns. In fact, the household savings ratio** increased from 8.9% in January-March 2020 to 25.9% in April-June 2020. Unsecured debt fell between March 2020 and May 2021, with many households spending less and so needing to borrow less, if at all.
**household savings as a proportion of household disposable income
Debt itself isn’t a bad thing – as long as you borrow responsibly. Here are a few tips.
- Think about whether a loan is right for you. There may be other options which suit your financial situation more. For example, a credit card with 0% on purchases might be a better solution for you, provided you can pay it off within the 0% period. Or you may be able to simply save up for what you want.
- Know how much you can repay before you borrow, and stick to it when you’re looking for loans.
- Learn the lingo. Make sure you understand what terms like annual percentage rate (APR) and secured and unsecured loans mean, and how they’d apply if you took out a specific loan.
- Shop around. Research and compare loans to see what they have to offer.
- Pay attention to interest rates. Interest-free deals are only worth taking if you can pay them back before the interest-free period ends – after that you may find the rate rises steeply.
- Understand everything before you sign anything. Talk to the lender if you need clarification on any part of the loan agreement.
- Make your repayments on time. Missing repayments will have a negative impact on your credit score. If you’re worried about missing a repayment, talk to your lender as soon as possible. They may be able to change your repayments so you don’t fall behind.
When you consolidate your debts, they’re combined into a single loan. This means you’ll only have a single payment to make each month, which can make managing debt easier. But is a debt consolidation loan worth it? There are pros and cons.
|Debt consolidation loan||Debt consolidation cons|
|Interest rates and monthly payments are often lower||There can be extra charges for setting up a new loan|
|You only have to make one payment per month||You could end up paying more and for longer|
|You only have to deal with one lender||If you begin to struggle to pay back the consolidated loan, it may be more difficult to make a new arrangement with the lender|
|You know when the debt will be paid off||You may only be able to get a consolidated loan at a high interest rate, or secured against your home|
|You may be less likely to fall behind on repayments||If the loan is secured against your home, your home could be repossessed if you don’t keep up your payments|
Dealing with problem debt
If you’re struggling to manage your debts you can find a list of free debt advice services here.
Options for people in difficulties with debt can include:
A Debt Management Plan. This is an agreement between you and your creditors about how you’ll pay back any unsecured debts.
A Debt Arrangement Scheme (in Scotland). This allows you to pay your debts in full over a reasonable extended time period, based on your disposable income.
A Debt Relief Order (DRO). Under one of these orders, your creditors can’t take any action against you for 12 months, unless they get permission from the court. If your circumstances haven’t changed at the end of the DRO, you’ll be freed from all the debts listed in it.
An Administration Order. If you have a County Court Judgment or High Court Judgment against you, the debt is less than £5,000 and you can’t pay it off in full, you can apply for an Administration Order. If accepted, you’ll make a monthly payment to the court, who will split it between your creditors.
An Individual Voluntary Arrangement (IVA). An insolvency practitioner works out how much you can afford to pay over what period of time, then contacts your creditors to see if they are willing for the IVA to go ahead. If so, you make regular payments to the insolvency practitioner, who then splits the money between your creditors.
The ‘Breathing Space’ scheme. This gives you temporary protection from your creditors if you live in England and Wales. This protection can last up to 60 days. You still have to pay your debts, but it means your creditors can’t take enforcement action, contact you about your debts, or add charges or interest to what you owe.
Frequently asked questions
What is APR?
The annual percentage rate – or APR – is the total cost of borrowing money over the course of a year. It’s shown as a percentage of the amount borrowed. As well as the cost of the interest rate, any fees that are automatically added to the loan, for example, such as arrangement fees, are also included in the figure.
Knowing what the APR is can help you compare the costs of taking out a personal loan or credit card. Lenders must tell you about the representative or typical APR when they advertise a loan. Where the term ‘representative APR’ is used, this advertised rate must be offered to at least 51% of successful applicants. If you’ve been pre-approved, some providers will confirm your eligibility for the advertised rate, subject to final lender checks.
But while the APR is good for making comparisons, it’s essential you look at all aspects of a loan before signing up.
Can I save by switching loans?
It depends. Many loans have a penalty for paying them off early. So you’d need to be sure that your new loan would save you more than any penalty you’d need to pay.
If you want to reduce your monthly payments, you could opt for a loan with a longer term. You’ll pay less every month, which could be more affordable in the short term, but you may pay more overall.
If you have more than one debt, you might want to consider a debt consolidation loan. This type of loan lets you turn multiple debt payments – credit cards, store cards, overdrafts or loans – into one outgoing payment. It could be an option worth considering if you can find one with a lower interest rate than that on you existing debts, as it could reduce the total interest you’re paying on what you’ve borrowed.
How can I apply for a loan?
Applying for a loan is straightforward. You just have to supply details about yourself and your finances.
But every loan application you make could have an impact on your credit record, although this depends on the bureau used to conduct the search. A hard search by TransUnion, for example, won’t impact your main, consumer-facing score – which will only be impacted if an account is taken out.
And it’s not a good idea to apply for several loans at the same time. Lenders may think that you’re desperate for money and this may might make them wary of lending to you.
Instead, it’s worth using a loan eligibility checker that evaluates to find out which loans you’re likely to be offered accepted for, and then apply for one you know you’ll probably get. You can use the eligibility checker to compare interest rates and any other aspects of the loan, like early repayment penalties. This way, the only impact on your credit record will be for the loan you apply for and a very likely to be accepted for.
Just remember to make all your loan repayments on time. Even late payments can show up on your credit record.
What type of loans are available?
There are several types of loan, but the main difference is between secured and unsecured loans. With a secured loan, you use an asset like your car or home as collateral. This means that if you don’t pay your loan back, the lender can take possession of your car or home and sell it to get their money back. Here are some of the different types of loan.
Unsecured personal loan
With this type of loan, you don’t need to put up an asset - such as a your house or car - as security for the loan. You can use a personal loan for anything you want, like renovating your home, or paying for an expensive repair or replacement of something like a replacement central heating boiler.
These are guaranteed against one of your valuable assetssomething valuable that you own, which acts as your collateral. If you’re looking to borrow a larger amount of money, you may be asked to offer this kind of security. Remember, your home or your car will be at risk if you don’t keep up your payments.
Are for the purpose of buying a car and could come either as secured or unsecured. You could get a type of personal loan from a bank or lender, or car finance offered by dealerships and online brokers, which comes in a variety of forms.
With this type of loan, a relative or friend promises to pay back the loan if you can’t. They can be useful if you don’t have a credit history or have a poor credit history. You can’t compare this type of loan with Compare the Market.
Bad credit loans
These are specifically aimed at borrowers who have a poor credit history. While bad credit loans can give you a way to rebuild your credit score, the interest rate is generally much higher than usual. And sometimes you’llyou may need a guarantor before a lender will approve you for a loan.
Allow you to borrow money from other individuals, rather than through a bank or building society. Peer to peer loaning is a service that’s regulated by the Financial Conduct Authority (FCA), and so should not be confused with loan sharks). You can’t compare this type of loan with Compare the Market. We don’t compare this type of loan.
Debt consolidation loans
These allow you to put together different types of debts with multiple lenders by consolidating them debts into one loan and one monthly payment. Just be aware
This type of loan can potentially lower your monthly repayments providing credit at a lower interest rate than you’re paying today, or by spreading the debt over a longer period, but this could mean that you will likely pay more interest overall. It’s also worth taking into account that any potential savings might be cancelled out by additional fees and charges required to set up the loan or settle existing loans.
Compare the Market Limited acts as a credit broker, not a lender. To apply, you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.