Loan True Cost Calculator

What "true cost" means here

The headline interest rate on a loan is one component of cost; arrangement fees, processing charges, and any insurance products bundled into the loan together add a second component that the headline rate doesn't always show. The true cost of a loan is the sum of these — interest paid plus fees — expressed as a single figure: total amount paid (monthly payment × months) plus fees, minus the principal. That figure represents what borrowing the money actually costs above the original loan amount.

How to use it

Enter the loan principal, the monthly payment, the term in months, and the sum of all fees (arrangement, processing, late-payment estimates, and any insurance products bundled with the loan). The calculator returns the true cost, total payments, the fee component, the cost as a percentage of principal, and the term. The currency selector at the top of the calculator changes formatting throughout — the math itself is currency-neutral.

Worked example

Picture a 15,000 loan with a 304 monthly payment over 60 months and 400 in total fees (currency follows the selector). Total payments = 304 × 60 = 18,240. Adding 400 in fees gives 18,640 paid against a 15,000 principal. The true cost of borrowing is 3,640 — about 24.3% of the original principal. Drop the monthly payment to 280 and the true cost falls to 2,200; raise fees to 1,200 keeping everything else the same and the true cost rises to 4,440. The calculator updates instantly as inputs change.

How the math works

True cost = (monthly payment × term in months) + fees − principal. The model assumes the monthly payment is constant for the full term and that all fees are paid (whether upfront or rolled into the loan). It does not assume any specific interest rate — the rate is implied by the relationship between the principal, the monthly payment, and the term, and any fees on top are added separately.

How this differs from APR

APR (Annual Percentage Rate) expresses the cost of borrowing as a single annualised rate that incorporates fees. True cost as computed here expresses the same information as a single absolute amount in the loan's currency. APR is useful for comparing loans of different sizes and terms; absolute true cost is useful for budgeting against the specific loan being considered. Most consumer-credit regulators require APR to be disclosed in advertising and offer documents; the lender's loan-estimate document is the authoritative source for both figures on any specific quote.

What a negative result means

If the calculator (or a what-if scenario) returns a negative true cost, that means the total amount paid plus fees comes out lower than the original principal. Mathematically that's a subsidy: the borrower is repaying less than they borrowed. This usually only appears in what-if scenarios where the monthly payment is reduced below an amortising level — it's not normally a real-world loan outcome unless the loan is being forgiven, partially written off, or carries an explicit subsidy. Treat negative figures as a sanity check on the inputs rather than a target.

What this calculator doesn't capture

The model assumes a fixed monthly payment for the full term and a single fee bundle paid upfront or rolled into the principal. Variable-rate loans where the monthly payment changes during the term, mid-term fee changes, prepayment provisions (which can reduce true cost) or prepayment penalties (which can raise it), insurance products that pay out only under specific conditions, and tax treatments that vary by country and product type are all outside this calculation. The figures are an estimate of headline true cost based on the four inputs entered.