How simple (flat) interest works
Interest is the amount × the flat rate × the years. It's added to the amount and split into equal monthly repayments. Because you pay interest on the full amount even as you repay it, the flat rate looks lower than the true cost.
The calculator also solves the APR: the effective yearly rate at which your repayments pay off the amount (FCA CONC App 1.2). UK lenders must quote this APR.
Worked example
£10,000 at a 5% flat rate over 5 years: interest is £2,500, so you repay £12,500 at £208.33 a month. The APR is 9.55%, nearly double the flat rate.
At 8% flat over 3 years, the repayment is £344.44 and the APR is 15.56%.
Flat rate vs APR
Flat rates still appear on some car finance, hire purchase and loans from abroad. Always compare the APR, which accounts for the balance falling as you repay.
What this calculator assumes
Interest on the original amount for the whole term, no fees, and equal monthly repayments. Paying off early may not cut the interest in proportion; check your agreement.
Borrowing in the US?
The country choices above the inputs open separate local pages. In the US, a simple interest loan means something different: interest builds daily on the balance still owed, so it falls as you pay. Choosing United States opens that page and resets the inputs; amounts are not converted.
For a US simple interest loan, use the US simple interest loan calculator in US dollars.
Inputs for the UK simple loan calculator
Amount borrowed
How much you're borrowing, in pounds.
Flat interest rate (per year)
The yearly rate charged on the full amount for the whole loan.
Term
How long you take to repay, in years.
CALCULATOR QUESTIONS
UK simple loan calculator questions
How do you calculate simple interest on a loan?
Multiply the amount by the yearly rate and the number of years. £10,000 at 5% for 5 years is £2,500 of interest.
Why is the APR so much higher than the flat rate?
A flat rate charges interest on the whole amount for the whole term, even though you owe less each month. The APR measures interest on what you actually owe.
Is a flat-rate loan a bad deal?
Not always. Compare its APR with other loans; that's the fair comparison.
Is simple interest the same in the US?
No. A US simple interest loan charges daily interest on the falling balance, which is closer to a normal UK repayment loan.