A lower rate on a new personal loan does not automatically mean switching saves money. The early repayment charge on the existing loan is a real cost that must be deducted from any interest saving. If the remaining term is short, the remaining interest may be too small for even a significantly lower rate to overcome the settlement fee. This calculator runs the full comparison: total remaining cost on the current loan vs total cost of the new loan plus the settlement fee, producing a net saving or net cost figure that answers the question directly.
All figures are illustrative. The early repayment charge defaults to 1% of the outstanding balance, which is the statutory maximum under the Consumer Credit Act for loans with more than 12 months remaining (0.5% for 12 months or fewer). Many lenders charge less or nothing. Check the specific loan agreement or contact the lender to confirm the charge that applies. This tool is for informational purposes and does not constitute financial advice.
At a Glance
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The calculator compares the total remaining cost of the current loan against the total cost of a new loan plus the settlement fee. The net result is what matters, not the rate difference alone.
A rate reduction of two percentage points sounds significant. But if the remaining term is short and the settlement fee is applied, the interest saved may be less than the fee. The calculator shows both figures side by side and produces a single net result: how much switching saves, or how much it costs. Cases where switching costs more are flagged clearly rather than hidden.
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The early repayment charge is capped by law. The default is 1%, but many lenders charge less or nothing. Adjusting the ERC slider shows how the fee changes the result.
Under the Consumer Credit Act, the maximum early repayment charge is 1% of the amount repaid early if more than 12 months remain, or 0.5% if 12 months or fewer remain. The charge cannot exceed the total remaining interest. The calculator defaults to 1% but can be adjusted down to 0% to model lenders that charge no fee. The difference between a 1% fee and a 0% fee can be the difference between switching being worthwhile and not.
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Changing the term on the new loan changes the result significantly. A longer new term may wipe out the rate saving by extending the interest period.
The calculator allows a different term for the new loan, because borrowers sometimes switch to a longer term to reduce the monthly payment. If the new term is longer than the remaining term, the lower rate applies for more months, which can increase the total interest even though the rate is lower. The calculator shows this trade-off clearly and flags when a longer term offsets the rate saving.
Loan Switching Calculator
Enter your current loan details and the new rate to see whether switching saves money after the settlement fee. All figures are illustrative.
Stay with current loan
Monthly payment
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Total remaining cost
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Remaining interest
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Switch to new loan
Monthly payment
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Total cost of new loan
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Interest on new loan
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Net result
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About this calculator
Whether a lower rate has appeared in an eligibility check, a pre-approved offer has arrived from a new lender, or the credit profile has improved since the original loan was taken.
Shows the monthly payment, total cost, and total interest for both the current and new loan side by side, deducts the early repayment charge, and produces a single net result: saving or additional cost.
Run the numbers before committing. The calculator shows whether the saving justifies the switch and flags cases where switching costs more, so the decision is based on the net figure, not just the rate difference.
The new APR entered is illustrative. Use a soft-search eligibility checker to see the rate likely to be offered before entering it here. Some new loans carry arrangement fees that this calculator does not model.
How to use this calculator
Set the remaining balance, current APR, and remaining term in months. These should match your latest loan statement. If the statement shows the original balance and term, subtract the payments already made to find the remaining figures, or contact the lender for a current statement.
Set the APR offered by the new lender (use the rate from a soft-search eligibility check if available) and the term. The “Match to remaining term” button copies the current remaining term, which gives a like-for-like comparison. Changing the new term shows how a longer or shorter term affects the result.
The default is 1% (the statutory maximum for loans with more than 12 months remaining). If the lender charges less, or nothing, adjust the slider down. If 12 months or fewer remain, the maximum is 0.5%. Check the loan agreement or contact the lender to confirm the exact figure.
The net result is the figure that matters. A positive number (shown in teal) means switching saves that amount. A negative number (shown in red) means switching costs more. The verdict text explains why. If the result is marginal (under £50), the convenience of staying may outweigh the saving.
When switching works and when it does not
Switching a personal loan to a lower rate saves money when the interest saved over the remaining term exceeds the early repayment charge on the existing loan. The larger the rate gap and the longer the remaining term, the more likely switching is to produce a net saving. The smaller the rate gap and the shorter the remaining term, the less likely it is, because the interest saved shrinks while the fee (calculated as a percentage of the balance) stays proportionate.
As a general pattern, switching is most likely to save money when the remaining term is 18 months or more, the rate reduction is two percentage points or greater, and the early repayment charge is at or below 1%. Switching is least likely to save money when the remaining term is under 12 months, the rate reduction is less than one percentage point, or the lender charges the full statutory maximum. The calculator models all of these scenarios, so the specific answer for any individual situation is visible rather than estimated from general rules.
The guide to switching or refinancing a personal loan covers the full process, including how to coordinate the old and new loans, and the guide to how to repay a personal loan early covers the statutory charge caps and the settlement process in detail.
The term trap when switching
One of the most common mistakes when refinancing a personal loan is extending the term on the new loan. The monthly payment drops, which feels like a saving, but the lower rate is applied over more months, and the total interest on the new loan can exceed the total remaining interest on the current loan even though the rate is lower.
For example, a borrower with £8,000 remaining at 12% APR over 24 months has a monthly payment of approximately £377 and total remaining interest of approximately £1,040. If the borrower switches to a new loan at 7% APR but extends the term to 36 months, the monthly payment drops to approximately £247, but the total interest on the new loan is approximately £889. After the settlement fee of £80 (1% of £8,000), the total cost of the new route is approximately £8,969, compared to approximately £9,040 for staying. The net saving is only £71, despite a five-percentage-point rate reduction, because the extra 12 months of interest on the new loan consumed most of the saving.
The calculator shows this clearly by allowing a different term on the new loan and displaying the effect on the net result. The “Match to remaining term” button provides the like-for-like comparison that isolates the rate saving from the term effect. All figures are illustrative.
Related tools
If you are paying off the loan rather than switching, this calculator shows the net saving after the charge is deducted.
Model the monthly payment and total cost of the new loan independently at any amount, term, and APR.
Compare up to three new loan offers side by side if you are choosing between multiple switching options.
Looking for more loan resources?
Guides and tools covering secured loans, debt consolidation, and home improvementsFrequently asked questions
How do I find out the early repayment charge on my current loan?
The loan agreement states whether an early repayment charge applies and at what rate. If the agreement is not to hand, contact the lender and request a settlement figure. The settlement figure includes the outstanding balance, any accrued interest, and the early repayment charge, itemised so you can see the breakdown. The lender must provide this within seven working days of the request, and the figure is valid for 28 days.
If the lender charges no early repayment fee (which is the case for some mainstream personal loans), the settlement figure will equal the outstanding balance plus any accrued interest for the current month. In this scenario, the ERC slider in the calculator should be set to 0%, which removes the fee from the comparison and typically makes switching to a lower rate clearly beneficial.
Should I match the term or extend it on the new loan?
Matching the term gives the clearest view of whether the rate saving alone justifies switching. The monthly payment may increase slightly (because the same balance is repaid over the same remaining period at a different rate), but the total cost comparison is purely rate-driven. Extending the term reduces the monthly payment but can consume the rate saving through additional months of interest. The calculator shows both scenarios by allowing the new term to be set independently.
If the goal of switching is primarily to reduce the monthly payment rather than to save on total cost, a longer term achieves that, but the total cost comparison should still be reviewed. A lower monthly payment that costs more in total is a cash-flow decision, not a saving. The guide to switching or refinancing covers when each approach is appropriate.
What if the new lender charges an arrangement fee?
Some personal loan providers charge an arrangement or administration fee on the new loan. This calculator does not model these fees separately. If the new lender charges a fee, add it to the total cost of the new loan mentally when reading the net result. For example, if the calculator shows a net saving of £200 and the new lender charges a £50 arrangement fee, the actual net saving is £150. Most mainstream unsecured personal loan providers do not charge arrangement fees, but it is worth checking the terms of the new offer.
If the arrangement fee is added to the loan balance (rather than paid upfront), the monthly payment and total interest on the new loan will be slightly higher than the calculator shows, because the principal is larger. In this case, entering the balance plus the fee as the amount in the repayment calculator gives a more accurate picture of the new loan cost.
Can I switch if my credit score has changed since the original loan?
Yes. If your credit score has improved since taking the original loan (through on-time payments, reduced credit card balances, or simply the passage of time), you may now qualify for a lower rate than you were offered originally. Running a soft-search eligibility check with two or three lenders shows the rate likely to be offered now. If the indicated rate is meaningfully lower than the current loan rate, enter it into this calculator to see whether the net saving after the settlement fee makes switching worthwhile.
If your credit score has worsened, the rate available on a new loan may be higher than your current rate, in which case switching does not make sense. The calculator flags this clearly: if the new APR is equal to or higher than the current APR, the net result will show that switching costs more. The guide to what credit score you need covers how different score bands typically translate into different rates.
Is there a minimum saving that makes switching worthwhile?
There is no formal minimum, but a practical threshold is useful. Switching involves administrative effort: requesting a settlement figure, applying for a new loan, managing the transition. If the net saving is under £50, the effort may not feel justified. If the net saving is £100 or more, the effort is typically proportionate to the benefit. If the net saving is £200 or more, switching is clearly worthwhile for the financial outcome alone.
The break-even period, shown in the calculator when switching is beneficial, indicates how many months of lower payments it takes to recover the settlement fee. A break-even of two to three months means the fee is recovered quickly and the remaining saving is genuine. A break-even of 12 months or more means the borrower needs to complete most of the new loan term before the saving materialises, which introduces more uncertainty.
Squaring Up
The loan switching calculator answers a single question: does the interest saved by the lower rate exceed the settlement fee on the existing loan? If the net result is positive, switching saves money. If it is negative, staying is cheaper. The term comparison is equally important: extending the term on the new loan can wipe out a rate saving by adding months of interest. Matching the term gives the clearest like-for-like comparison. Use the ERC slider to model the specific charge on your loan, and check with the lender before committing.
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Everything in one place, across secured loans, debt consolidation, and home improvementsThis calculator is for illustrative purposes only and does not constitute financial advice. Monthly repayment figures use the standard annuity formula (reducing balance, monthly compounding). The APR values entered are illustrative. The rate offered on any new loan depends on the borrower’s credit profile, income, existing commitments, and the lender’s own criteria. Early repayment charge caps are set by the Consumer Credit Act and are stated accurately. Missed repayments can affect your credit rating and may result in further action.
