£500 Personal Loan over 2 years: what it costs each month
What a £500 personal loan over 2 years costs at different rates
The rate you are offered depends on your credit score, your income and how much you borrow. The same £500 over 2 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 £0.21 and the total interest by about £5.
£500 over 2 years by interest rate
| APR | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 5.9% | £22.10 | £30 | £530 |
| 7.9% | £22.53 | £41 | £541 |
| 9.9% | £22.95 | £51 | £551 |
| 14.9% | £24.00 | £76 | £576 |
| 19.9% | £25.03 | £101 | £601 |
| 24.9% | £26.05 | £125 | £625 |
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 £500 over 24 months at 9.9% APR the monthly rate is 0.7898%, which gives £22.95. Multiplying by 24 months gives £551 repaid in total, so the cost of borrowing is £51.
Should you borrow £500 over 2 years or a different term?
A longer term lowers the monthly payment but you pay interest for longer. At 9.9% APR, repaying £500 over 1 year costs £43.84 a month and £26 in interest, while 7 years costs £8.17 a month and £186 in interest. That is £160 more for the lower payment.
£500 at 9.9% APR by term
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 1 year | £43.84 | £26 | £526 |
| 2 years | £22.95 | £51 | £551 |
| 3 years | £16.01 | £76 | £576 |
| 4 years | £12.56 | £103 | £603 |
| 5 years | £10.50 | £130 | £630 |
| 7 years | £8.17 | £186 | £686 |
Interest versus capital: where your payments go
Early payments are mostly interest. In year 1 of this £500 loan, £37 of your £275 goes on interest and £238 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.
£500 at 9.9% APR over 2 years
| Year | Interest paid | Capital repaid | Balance left |
|---|---|---|---|
| 1 | £37 | £238 | £262 |
| 2 | £14 | £262 | £0 |
Totals for each year of the loan.
What happens if you overpay your £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 £500 loan at 9.9% APR
| Extra payment | New monthly payment | Loan cleared in | Interest saved |
|---|---|---|---|
| +£5 a month | £27.95 | 20 months | £10 |
| +£10 a month | £32.95 | 17 months | £16 |
| +£20 a month | £42.95 | 13 months | £24 |
Compared with the normal 2 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 £22.95 payment fits that guide if your monthly take-home pay is at least £69.
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 £160 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 2 years adds about £45.90 to the monthly payment.
Sources and further reading
Questions people ask
How much is a £500 personal loan per month over 2 years?
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Is it cheaper to borrow £500 over a shorter time?
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Does this calculator include fees?
Results are estimates for information only, not financial advice. Read the full disclaimer.