£20,000 Personal Loan over 7 years: what it costs each month
What a £20,000 personal loan over 7 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 7 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 £9.43 and the total interest by about £792.
£20,000 over 7 years by interest rate
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5.9% | £289.74 | £4,338 | £24,338 |
| 7.9% | £308.03 | £5,874 | £25,874 |
| 9.9% | £326.65 | £7,438 | £27,438 |
| 14.9% | £374.47 | £11,455 | £31,455 |
| 19.9% | £423.72 | £15,593 | £35,593 |
| 24.9% | £473.99 | £19,815 | £39,815 |
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 84 months at 9.9% APR the monthly rate is 0.7898%, which gives £326.65. Multiplying by 84 months gives £27,438 repaid in total, so the cost of borrowing is £7,438.
Should you borrow £20,000 over 7 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, £1,805 of your £3,920 goes on interest and £2,115 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 7 years
| Year | Interest paid | Capital repaid | Balance left |
|---|---|---|---|
| 1 | £1,805 | £2,115 | £17,885 |
| 2 | £1,596 | £2,324 | £15,561 |
| 3 | £1,366 | £2,554 | £13,007 |
| 4 | £1,113 | £2,807 | £10,201 |
| 5 | £835 | £3,085 | £7,116 |
| 6 | £530 | £3,390 | £3,726 |
| 7 | £194 | £3,726 | £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 |
|---|---|---|---|
| +£35 a month | £361.65 | 73 months | £1,048 |
| +£70 a month | £396.65 | 65 months | £1,831 |
| +£140 a month | £466.65 | 53 months | £2,926 |
Compared with the normal 7 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 £326.65 payment fits that guide if your monthly take-home pay is at least £980.
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 7 years adds about £16.33 to the monthly payment.
Sources and further reading
Questions people ask
How much is a £20,000 personal loan per month over 7 years?
How much interest will I pay on £20,000 over 7 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.