How to use the calculator
- Choose how the offer is described. Fee per instalment is for plans that charge a fixed percentage of the original amount every month, such as card instalment plans and many "flat rate" loans. Fixed payment is for any loan where you know the monthly amount. Repay at the end is for a single repayment after a term.
- Enter the amount borrowed, the number of monthly payments and the fee or payment. If the lender deducts an arrangement or service fee at the start, enter it as the upfront fee: you receive less, but repay the full amount.
- Read the results. The APR is the monthly rate implied by the payments multiplied by 12, which is how US lenders must disclose it. The effective annual rate includes compounding and is the figure UK and EU lenders advertise as APR. The total cost is everything you pay beyond the amount borrowed.
How the real rate is calculated
Any loan can be written as cash flows: money you receive today, payments you make later. The true cost is the single interest rate at which the payments, discounted back to today, exactly equal the money you received — the internal rate of return (IRR). This calculator finds that monthly rate numerically, then expresses it two ways.
In the United States, Regulation Z requires the annual percentage rate to be found by the actuarial method: the rate per payment period multiplied by the number of periods in a year. The CFPB puts it simply: the APR is the interest rate plus the lender's fees. In the UK, the FCA's APR formula discounts every payment at an annual rate measured in years and fractions of a year, so the advertised APR already includes compounding — it is the effective annual rate shown here. China uses the same idea: since 2021 the central bank has required lenders to show an annualised rate calculated from all costs relative to the principal actually used.
Why a flat fee costs almost double
A fee charged every month on the original amount ignores the fact that you are paying the amount back. By the last month you owe only one twelfth of the loan, yet the fee is still calculated on all of it. On average you hold a little over half the original amount across the term, so the real rate comes out at nearly twice the headline figure of monthly fee × 12. Upfront fees push it higher still, because you pay interest on money you never received.
Examples
| Offer | APR (nominal) | Effective annual rate |
|---|---|---|
| 10,000 over 12 months, 0.6% monthly fee | 13.03% | 13.84% |
| Same fee over 24 months | 13.27% | 14.10% |
| Same fee over 6 months | 12.24% | — |
| 1,200 "interest-free" in 12 × 100, with a 60 upfront fee | 9.58% | — |
| 100,000 over 12 months: 1,000 service fee plus 0.5% a month | 12.80% | 13.58% |
| 1,000,000 mortgage, 240 payments of 6,599.60 | 5.00% | 5.12% |
The first row is the classic card instalment plan: the fee looks like 7.2% a year (0.6% × 12), and costs 720 on 10,000, but the real APR is 13.03%. Longer plans cost slightly more, because the fee keeps being charged on the full amount while the average balance keeps shrinking. The last two rows are the worked examples published by the People's Bank of China with its 2021 disclosure rule, and the calculator reproduces them exactly; a two-year loan of 100,000 repaid with 110,000 at the end comes out at 4.88% a year.
Limits
- Monthly payments only. Weekly or irregular schedules, payment holidays and balloon payments are not modelled.
- Fees must be known. Insurance, late fees and optional add-ons are not included unless you add them to the upfront fee or the payment.
- Legal disclosures follow detailed rules — about day counts, rounding and which fees count. The rates here are for comparing offers, not for checking a lender's disclosure to the last decimal.
Frequently asked questions
What is the difference between APR and interest rate?
The interest rate is only the charge on the balance. The APR includes fees and is based on the actual payments, so it is the better number for comparing offers.
Why is my "0.6% a month" plan more than 7.2% a year?
The fee is charged on the original amount every month, while you repay the amount gradually. Measured against what you actually owe, the rate is about 13% a year.
Is a 0% plan with a fee really free?
No. A 60 fee on a 1,200 plan repaid over a year works out at about 9.6% APR, because the fee is paid for money you only have for part of the year.
Which APR do UK lenders show?
UK lenders show an APR that includes compounding, which corresponds to the effective annual rate here. US lenders show the nominal APR.
Are my figures sent anywhere?
No. Everything is calculated in your browser.