CashMaths

Loan APR and Monthly Payments: What You Actually Pay

Rates for 2026/27. Last reviewed 29 October 2026.

When you compare loans, two numbers matter most: the monthly payment, which decides whether you can afford it, and the total amount repayable, which decides how much it really costs.

What APR means

APR stands for annual percentage rate. It expresses the yearly cost of borrowing, including interest and compulsory fees, as a single comparable percentage. It is useful for comparing loans of the same size and length.

The advertised rate may not be your rate

Lenders advertise a representative APR. By law, at least 51% of people who are accepted must receive that rate or better, which means up to 49% can be offered a higher one. Using a lender’s eligibility checker, which uses a soft credit search that does not affect your score, shows the rate you are likely to be offered.

How the monthly payment is set

On a standard fixed-rate loan, each payment covers that month’s interest plus some capital. Early payments are mostly interest; later payments are mostly capital. The monthly figure is fixed so that the balance reaches zero at the end of the term.

Longer terms cost more

Stretching a loan lowers the monthly payment but increases the total interest, because the balance stays higher for longer. For example, borrowing £10,000 at 7.9% APR costs roughly £201 a month over five years, with about £2,059 of interest.

Overpaying

Paying extra each month reduces the balance faster, so less interest builds up. Before overpaying, check:

  • whether your agreement charges an early repayment fee (these are limited by law, but they can still apply);
  • whether you would earn more by saving the money, if you have no high-interest debts;
  • whether you have an emergency fund.

When borrowing is a struggle

If you are finding debts hard to manage, free, impartial help is available from MoneyHelper and StepChange. Seek help early rather than late.