£4,000 Personal Loan over 7 years: what it costs each month
What a £4,000 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 £4,000 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 £1.89 and the total interest by about £158.
£4,000 over 7 years by interest rate
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5.9% | £57.95 | £868 | £4,868 |
| 7.9% | £61.61 | £1,175 | £5,175 |
| 9.9% | £65.33 | £1,488 | £5,488 |
| 14.9% | £74.89 | £2,291 | £6,291 |
| 19.9% | £84.74 | £3,119 | £7,119 |
| 24.9% | £94.80 | £3,963 | £7,963 |
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 £4,000 over 84 months at 9.9% APR the monthly rate is 0.7898%, which gives £65.33. Multiplying by 84 months gives £5,488 repaid in total, so the cost of borrowing is £1,488.
Should you borrow £4,000 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 £4,000 over 1 year costs £350.69 a month and £208 in interest, while 7 years costs £65.33 a month and £1,488 in interest. That is £1,279 more for the lower payment.
£4,000 at 9.9% APR by term
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 1 year | £350.69 | £208 | £4,208 |
| 2 years | £183.62 | £407 | £4,407 |
| 3 years | £128.09 | £611 | £4,611 |
| 4 years | £100.45 | £822 | £4,822 |
| 5 years | £83.96 | £1,038 | £5,038 |
| 7 years | £65.33 | £1,488 | £5,488 |
Interest versus capital: where your payments go
Early payments are mostly interest. In year 1 of this £4,000 loan, £361 of your £784 goes on interest and £423 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.
£4,000 at 9.9% APR over 7 years
| Year | Interest paid | Capital repaid | Balance left |
|---|---|---|---|
| 1 | £361 | £423 | £3,577 |
| 2 | £319 | £465 | £3,112 |
| 3 | £273 | £511 | £2,601 |
| 4 | £223 | £561 | £2,040 |
| 5 | £167 | £617 | £1,423 |
| 6 | £106 | £678 | £745 |
| 7 | £39 | £745 | £0 |
Totals for each year of the loan.
What happens if you overpay your £4,000 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 £4,000 loan at 9.9% APR
| Extra payment | New monthly payment | Loan cleared in | Interest saved |
|---|---|---|---|
| +£5 a month | £70.33 | 76 months | £156 |
| +£10 a month | £75.33 | 70 months | £282 |
| +£20 a month | £85.33 | 59 months | £472 |
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 £65.33 payment fits that guide if your monthly take-home pay is at least £196.
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 £1,279 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 £4,000 personal loan per month over 7 years?
How much interest will I pay on £4,000 over 7 years?
Is it cheaper to borrow £4,000 over a shorter time?
What income do I need for a £4,000 personal loan?
Does this calculator include fees?
Results are estimates for information only, not financial advice. Read the full disclaimer.