How much is a personal loan per month?
How much your personal loan will be each month depends on several factors, including the interest rate you’re offered, how much you borrow and how long you want to borrow money for.
You can use a loan calculator to help you work out estimated monthly repayments before you hit that ‘apply now’ button.
In this guide, we explain a bit more about how much a personal loan could cost you each month.
Factors that can impact your monthly loan repayments
1. Interest rates
The interest rate you’re charged will impact how much a loan will cost per month. Higher interest rates result in higher monthly payments, while lower rates result in lower ones.
A loan’s APR (Annual Percentage Rate) represents the total cost of borrowing money, including interest rates and any additional fees that may be charged by the lender.
The APR you’re offered when applying for a loan is entirely personal to you. It will be calculated at the point of application following a hard credit search, which gives the lender a detailed overview of your financial history.
Your personalised interest rate will be determined based on your personal and financial circumstances, plus your credit history. If you have a strong history of managing your money well in the past, it’s more likely you will be offered lower interest rates. That’s because you may be considered less of a risk to the lender, as you have proved you have a track record of repaying what you owe on time.
The loan amount and term you apply for will also impact the interest rate you’re offered, but we’ll discuss that in more detail next.
2. Loan term
Borrowing money over a shorter period will cost more per month than spreading your repayments over a longer timeframe.
For example, a £10,000 loan from us spread over two years at an interest rate of 7.4% APR will cost £448.47 per month whereas, spread over five years, it would cost you £198.79. That’s quite the difference.
However, you will pay more in total if you borrow money for longer despite your monthly repayments being lower.
Using the same example as the one above, a £10,000 loan from us with an interest rate of 7.4% APR would cost you £10,763.28 in total spread over two years compared to £11,927.40 in total spread over 5 years.
So, even though your monthly repayments may be significantly less when borrowing this amount over a longer period, the total amount of interest you’ll pay will be more.
Make a decision on your loan term based on how you prefer to organise your finances. Perhaps you would feel more comfortable paying a smaller amount each month over a longer period, even if it will cost you more in total. However, if you would prefer to lower the amount of interest you’ll pay over time, shortening your loan term could be a more suitable option if a higher monthly repayment amount is affordable for you.
3. Loan amount
How much you borrow will impact how much you pay each month.
It’s obvious, but repaying a loan of £1,000 over 5 years is going to cost much less per month compared to repaying a loan of £35,000 over the same period.
Do pay close attention to how much you’ll pay back in total though. Different loan amounts carry different interest rates. So while your monthly repayments may be lower for a smaller loan amount, you may find that you’ll pay a higher APR rate compared to a higher loan amount.
4. Additional fees
While here at Novuna Personal Finance we won’t charge any upfront fees or hidden costs, some lenders will charge you for a variety of things including application or arrangement fees.
These charges may not directly impact your ongoing monthly repayments, but you should always check a lender’s terms and conditions before applying to make sure you’re aware of any associated fees that could affect the total cost of your loan.
Using a loan calculator
One of the best ways to work out how much a personal loan could cost is to use an online loan calculator.
Our calculator divides the total amount payable (including interest) by the number of months it will take to pay off the loan, giving you an idea of how much the loan could cost you per month based on our advertised rate.
You can use a loan calculator to see how an increased loan amount or term might impact your monthly repayment and total loan cost, too, with no impact on your credit score. Simply tweak the loan amount or term on the calculator to see the effect this could have on your repayments.
Alternatively, you can enter your monthly budget into the loan calculator to find out how much you could borrow. This could help you to make sure you only borrow what you need and can afford to repay each month.
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Sophie Venner is a Yorkshire-based content writer specialising in crafting content for the financial services industry. She’s written over 300 articles on finance, but she’s covered everything from insurance to digital marketing trends. Her content has been featured in the likes of Semrush, Digital Marketing Magazine and Insurance Business. In her spare time, you won’t find Sophie far from a notepad and pen as she squirrels away trying to write a novel.
Wednesday 30th August 2023