Interest from a yearly rate with monthly payments
A UK APR is an effective yearly rate, so each month's rate is one plus the APR, raised to the power of one twelfth, less one. A £2,000 loan at 29.9% APR over 6 months has a monthly payment of £359.51, interest of £157.07 and a total to repay of £2,157.07. That is the default, Effective APR (FCA). Choosing APR divided by 12 in the APR convention field gives a monthly payment of £363.00, interest of £177.99 and a total to repay of £2,177.99, and the effective APR shown becomes 34.36%. For a term in days it charges simple interest, so £500 at 120% APR for 45 days costs £73.97 instead of £51.04.
Interest from a daily rate
For a payday-style loan the rate is a rate per day on the amount outstanding. £500 at 0.8% a day for 30 days costs £120.00 in interest, which is 24.00% of the amount borrowed, or £24 per £100, and has an effective APR of 1,269.72%. A daily rate above 0.8%, or interest and charges above the amount borrowed, is shown with a warning that cites the FCA rule (CONC 5A.2.3R and 5A.2.2R).
Interest from a flat charge
A flat charge is a percentage of the amount borrowed, charged once. A flat 12% on £10,000 over 6 months is £1,200.00. Because the charge is on the full amount for a short term, the effective APR is much higher at 25.44%. Compare offers by total cost and APR, not the flat percentage.
Which basis to use
Use the basis your offer states. A loan of months with an APR usually repays in monthly instalments. A loan of days with a daily rate repays once. If you only know the total charge, use the flat basis. The calculator does not add a lender's fees. The payday cap applies to high-cost short-term credit as the FCA defines it, so check your agreement.
For a late payment and instalments at the payday cap, use the UK payday loan calculator.
To pay only the interest each month, use the short-term interest-only loan calculator.
Inputs for the UK short-term loan interest calculator
Interest is quoted as
A yearly rate (APR) with monthly payments, a rate per day for one payment, or one flat charge for the whole loan.
Amount borrowed
The amount you borrow.
Yearly interest rate (APR)
The APR on your offer, as an effective yearly rate. It is converted to a monthly rate.
APR convention
Shown when the interest is quoted as a yearly rate. Effective APR (FCA) is the default and follows the FCA APR rule. APR divided by 12 is how many UK sites work and gives a slightly higher monthly rate.
Daily interest rate
Percent of the amount borrowed charged each day. The legal cap for payday-style loans is 0.8%.
Flat charge
A percentage of the amount borrowed, charged once for the whole loan.
Loan term
How long you borrow for, in the unit chosen next to it.
Term in
Days or months. A yearly rate with months means equal monthly payments.
CALCULATOR QUESTIONS
UK short-term loan interest calculator questions
How do you calculate interest on a short-term loan?
It depends on how the rate is quoted. A £2,000 loan at 29.9% APR over 6 months costs £157.07 in interest in total, paid as £359.51 a month.
How do you calculate payday loan interest?
Multiply the amount by the daily rate and the number of days. £500 at 0.8% a day for 30 days is £120.00.
What is the most a short-term lender can charge in the UK?
For high-cost short-term credit, 0.8% of the amount outstanding a day and no more than the amount borrowed in total (CONC 5A.2.3R and 5A.2.2R). Other loans are not covered by this cap.
Why does the APR differ from the flat rate?
A flat charge is on the whole amount for the whole term, so the effective APR is higher than the flat percentage suggests. A flat 12% over 6 months is 25.44% APR.