How to work out the real total cost of a loan
The short answer
For a fixed loan with equal monthly payments and no final payment, multiply the monthly payment by the number of payments to estimate total repayable, then subtract the amount borrowed. Use the lender’s formal total-repayable figure when available because fees, changing payments or a balloon payment can make the shortcut incomplete.
The monthly payment is a budgeting number, not a complete price. A lender can lower it by extending the term, which may increase the interest paid overall.
A useful shortcut for simple fixed loans
If every payment is equal, there is no deposit or final payment, and all compulsory fees are included, calculate total repayable as monthly payment multiplied by number of payments. Subtract the amount borrowed to estimate the pounds paid for credit.
Worked example
If a £10,000 loan has 48 equal payments of £243.85, the payments total £11,704.80. Subtracting £10,000 gives an estimated credit cost of £1,704.80. Keep the pence in your own calculation rather than rounding each payment.
Compare the same amount and term
A fair comparison holds the amount and term constant. If one quote runs for longer, compare both its monthly affordability and its higher or lower total amount repayable.
Questions people ask
Should I choose the lowest monthly repayment?
Not automatically. Check whether it is lower because the term is longer, then compare total repayable and whether the payment remains affordable under a realistic budget.
Is total cost the same as APR?
No. APR is a standardised annual percentage; total cost expresses the price in money over the specific agreement. Use both.
Sources and fact-check date
Reviewed for source accuracy and plain-language clarity. Not reviewed by a named regulated financial adviser; this is general information, not personalised advice.
- Managing credit well — MoneyHelper; accessed .
- FCA reviewing whether APRs support consumers’ choices — Financial Conduct Authority; accessed .
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