£12,500 Personal Loan over 3 years: what it costs each month
What a £12,500 personal loan over 3 years costs at different rates
The rate you are offered depends on your credit score, your income and how much you borrow. The same £12,500 over 3 years can cost very different amounts, so it is worth seeing the whole range before you apply.
Moving the rate by one percentage point, from 9.9% to 10.9%, changes the monthly payment by about £5.36 and the total interest by about £193.
£12,500 over 3 years by interest rate
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5.9% | £378.84 | £1,138 | £13,638 |
| 7.9% | £389.56 | £1,524 | £14,024 |
| 9.9% | £400.28 | £1,910 | £14,410 |
| 14.9% | £427.04 | £2,873 | £15,373 |
| 19.9% | £453.70 | £3,833 | £16,333 |
| 24.9% | £480.24 | £4,789 | £17,289 |
Fixed rate, equal monthly payments, no fees.
The formula behind the payment
The payment on a fixed-rate loan is: amount × monthly rate ÷ (1 − (1 + monthly rate)−months). For £12,500 over 36 months at 9.9% APR the monthly rate is 0.7898%, which gives £400.28. Multiplying by 36 months gives £14,410 repaid in total, so the cost of borrowing is £1,910.
Should you borrow £12,500 over 3 years or a different term?
A longer term lowers the monthly payment but you pay interest for longer. At 9.9% APR, repaying £12,500 over 1 year costs £1,095.91 a month and £651 in interest, while 7 years costs £204.15 a month and £4,649 in interest. That is £3,998 more for the lower payment.
£12,500 at 9.9% APR by term
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 1 year | £1,095.91 | £651 | £13,151 |
| 2 years | £573.80 | £1,271 | £13,771 |
| 3 years | £400.28 | £1,910 | £14,410 |
| 4 years | £313.90 | £2,567 | £15,067 |
| 5 years | £262.38 | £3,243 | £15,743 |
| 7 years | £204.15 | £4,649 | £17,149 |
Interest versus capital: where your payments go
Early payments are mostly interest. In year 1 of this £12,500 loan, £1,023 of your £4,803 goes on interest and £3,780 reduces what you owe. By the last year the split reverses, which is why paying off a loan early saves more in the early years than the later ones.
£12,500 at 9.9% APR over 3 years
| Year | Interest paid | Capital repaid | Balance left |
|---|---|---|---|
| 1 | £1,023 | £3,780 | £8,720 |
| 2 | £649 | £4,154 | £4,566 |
| 3 | £238 | £4,566 | £0 |
Totals for each year of the loan.
What happens if you overpay your £12,500 loan?
Paying a little extra each month cuts the balance faster, so less interest is charged. Check that your lender allows overpayments and whether there is a charge: many allow up to a set amount a year without one.
Overpaying a £12,500 loan at 9.9% APR
| Extra payment | New monthly payment | Loan cleared in | Interest saved |
|---|---|---|---|
| +£40 a month | £440.28 | 33 months | £200 |
| +£80 a month | £480.28 | 30 months | £361 |
| +£160 a month | £560.28 | 25 months | £605 |
Compared with the normal 3 years term. Fixed rate, no fees.
How to work out if the payment is affordable
A common check is to keep all debt repayments, including this personal loan, below about a third of your take-home pay. A £400.28 payment fits that guide if your monthly take-home pay is at least £1,201.
Also look at what happens if your income drops. Choose a payment you could still make for several months without borrowing again.
UK rules worth knowing before you borrow
- Use an eligibility checker first. A "soft search" shows likely offers without leaving a mark on your credit file, while a full application leaves a hard search.
- The advertised "representative APR" only has to be offered to at least half of the people who are accepted, so your own rate can be higher.
- You have a right to repay a loan early. The lender can charge a limited amount of interest for doing so, so check the early repayment terms.
- Free, impartial help with debts is available from MoneyHelper, Citizens Advice, StepChange and PayPlan.
Ways to pay less interest
- Pick the shortest term whose monthly payment you can comfortably afford. Going from 7 years to 1 year would save £3,998 on this loan.
- Improve your credit file before you apply: register on the electoral roll, correct errors and pay existing bills on time.
- Make extra payments when you can, as long as there is no penalty. Each extra payment cuts the balance that interest is charged on.
- Borrow only what you need: every extra £1,000 at 9.9% over 3 years adds about £32.02 to the monthly payment.
Sources and further reading
Questions people ask
How much is a £12,500 personal loan per month over 3 years?
How much interest will I pay on £12,500 over 3 years?
Is it cheaper to borrow £12,500 over a shorter time?
What income do I need for a £12,500 personal loan?
Does this calculator include fees?
Results are estimates for information only, not financial advice. Read the full disclaimer.