£20,000 Personal Loan over 3 years: what it costs each month
What a £20,000 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 £20,000 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 £8.57 and the total interest by about £309.
£20,000 over 3 years by interest rate
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5.9% | £606.14 | £1,821 | £21,821 |
| 7.9% | £623.30 | £2,439 | £22,439 |
| 9.9% | £640.45 | £3,056 | £23,056 |
| 14.9% | £683.26 | £4,597 | £24,597 |
| 19.9% | £725.93 | £6,133 | £26,133 |
| 24.9% | £768.39 | £7,662 | £27,662 |
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 £20,000 over 36 months at 9.9% APR the monthly rate is 0.7898%, which gives £640.45. Multiplying by 36 months gives £23,056 repaid in total, so the cost of borrowing is £3,056.
Should you borrow £20,000 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 £20,000 over 1 year costs £1,753.46 a month and £1,042 in interest, while 7 years costs £326.65 a month and £7,438 in interest. That is £6,397 more for the lower payment.
£20,000 at 9.9% APR by term
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 1 year | £1,753.46 | £1,042 | £21,042 |
| 2 years | £918.08 | £2,034 | £22,034 |
| 3 years | £640.45 | £3,056 | £23,056 |
| 4 years | £502.25 | £4,108 | £24,108 |
| 5 years | £419.82 | £5,189 | £25,189 |
| 7 years | £326.65 | £7,438 | £27,438 |
Interest versus capital: where your payments go
Early payments are mostly interest. In year 1 of this £20,000 loan, £1,637 of your £7,685 goes on interest and £6,048 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.
£20,000 at 9.9% APR over 3 years
| Year | Interest paid | Capital repaid | Balance left |
|---|---|---|---|
| 1 | £1,637 | £6,048 | £13,952 |
| 2 | £1,038 | £6,647 | £7,305 |
| 3 | £380 | £7,305 | £0 |
Totals for each year of the loan.
What happens if you overpay your £20,000 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 £20,000 loan at 9.9% APR
| Extra payment | New monthly payment | Loan cleared in | Interest saved |
|---|---|---|---|
| +£65 a month | £705.45 | 33 months | £324 |
| +£130 a month | £770.45 | 30 months | £585 |
| +£260 a month | £900.45 | 25 months | £978 |
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 £640.45 payment fits that guide if your monthly take-home pay is at least £1,921.
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 £6,397 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 £20,000 personal loan per month over 3 years?
How much interest will I pay on £20,000 over 3 years?
Is it cheaper to borrow £20,000 over a shorter time?
What income do I need for a £20,000 personal loan?
Does this calculator include fees?
Results are estimates for information only, not financial advice. Read the full disclaimer.