Topic
Loans and interest
Interest is a percentage that compounds over time. That's why a change in the rate that sounds small shows up surprisingly large in pounds – and why you shouldn't make a loan decision on the monthly payment alone.
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Background on this topic
Percentage point or per cent – with interest the difference is biggest
When a rate rises from 2% to 3%, the rise is one percentage point but your interest cost grows by 50%. The news often uses whichever figure fits the headline. The calculators show both, so you can see what's going on.
The total cost decides, not the monthly payment
Extending the term lightens the payment but clearly increases the total interest. The same £180,000 loan at 3.5% costs about £90,000 in interest over 25 years and about £111,000 over 30 years. Always compare the total amount repayable with the loan calculator.
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All the site's calculators are grouped into six topics. The same calculator can belong to more than one, because a percentage calculation is rarely tied to just one situation.
Guides
Frequently asked questions about loans and interest
How much does a one-percentage-point rate rise cost?
It depends on the loan amount. On a £200,000 loan, one percentage point is £2,000 a year in interest, before repayments reduce the balance.
Which is better, a repayment or interest-only mortgage?
With a repayment mortgage you pay less interest overall, because the balance falls from the start. Interest-only keeps payments low but the balance stays.
How does the term affect the total cost?
A longer term lightens the payment but increases interest. £180,000 at 3.5% costs about £90,000 in interest over 25 years and about £111,000 over 30.
What is the APRC?
The APRC (annual percentage rate of charge) includes the nominal rate plus all the loan's costs, such as the arrangement fee, so it's comparable between offers.