£20,000 Personal Loan over 5 years: what it costs each month
What a £20,000 personal loan over 5 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 5 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 £8.98 and the total interest by about £539.
£20,000 over 5 years by interest rate
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5.9% | £384.30 | £3,058 | £23,058 |
| 7.9% | £401.97 | £4,118 | £24,118 |
| 9.9% | £419.82 | £5,189 | £25,189 |
| 14.9% | £465.05 | £7,903 | £27,903 |
| 19.9% | £510.99 | £10,660 | £30,660 |
| 24.9% | £557.41 | £13,445 | £33,445 |
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 60 months at 9.9% APR the monthly rate is 0.7898%, which gives £419.82. Multiplying by 60 months gives £25,189 repaid in total, so the cost of borrowing is £5,189.
Should you borrow £20,000 over 5 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, £1,755 of your £5,038 goes on interest and £3,282 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 5 years
| Year | Interest paid | Capital repaid | Balance left |
|---|---|---|---|
| 1 | £1,755 | £3,282 | £16,718 |
| 2 | £1,430 | £3,607 | £13,110 |
| 3 | £1,073 | £3,965 | £9,145 |
| 4 | £681 | £4,357 | £4,788 |
| 5 | £249 | £4,788 | £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 |
|---|---|---|---|
| +£40 a month | £459.82 | 54 months | £589 |
| +£80 a month | £499.82 | 49 months | £1,055 |
| +£160 a month | £579.82 | 41 months | £1,748 |
Compared with the normal 5 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 £419.82 payment fits that guide if your monthly take-home pay is at least £1,259.
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 5 years adds about £20.99 to the monthly payment.
Sources and further reading
Questions people ask
How much is a £20,000 personal loan per month over 5 years?
How much interest will I pay on £20,000 over 5 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.