How HP interest works
HP agreements are usually quoted with a fixed rate and an APR, and repaid in equal monthly payments. Some HP deals also add fees, such as an option to purchase fee at the end, which this calculator doesn't include.
Interest is worked out each month on the balance you still owe, at one twelfth of the annual rate. Early payments are mostly interest; as the balance falls, more of each payment repays the loan.
Worked example
Financing £13,500 at 9% over 48 months costs £2,625.51 in interest. Over 36 months the payment rises to £429.30 but the interest falls to £1,954.67.
Settling early
You can settle an HP agreement early, which usually reduces the interest you pay. Ask the lender for a settlement figure.
Inputs for the HP loan interest calculator
Price
The price of the car or goods.
Deposit
What you're paying upfront. A bigger deposit means borrowing less and paying less interest.
Interest rate (per year)
The annual interest rate on your agreement. The rate shown is only an example, so enter the rate from your quote.
Term
How many months you'll repay over. A longer term means paying interest for longer.
CALCULATOR QUESTIONS
HP loan interest calculator questions
How much interest is on hire purchase?
Enter your details above. For example, £13,500 at 9% over 48 months costs £2,625.51 in interest.
Does a shorter HP agreement save interest?
Yes. In the example, 36 months instead of 48 saves £670.84.
Can I pay off HP early?
Yes. Settling early usually reduces the interest. Ask your lender for a settlement figure.
What's the difference between the interest rate and the APR?
The interest rate is what's charged on the balance. The APR also includes most compulsory fees, so it's better for comparing the overall cost of different loans.