At a Glance
- Enter a loan amount, APR, and term in months to see the total interest, monthly payment, and daily cost of the borrowing expressed as total interest divided by the number of days in the term. The daily cost figure translates the abstract total interest into a concrete everyday reference point that is easier to compare against other spending decisions. How to use this tool
- Four everyday comparison cards show what the daily cost equates to in familiar spending terms: cups of coffee, days of a streaming subscription, weekly food shops, and petrol fill-ups, all using illustrative unit costs. The purpose is not precision but perspective: seeing that a loan costs the equivalent of two cups of coffee per day or one food shop per month translates the interest into terms that are meaningful relative to daily life. What the daily cost figure actually means
- The rate sensitivity panel shows the daily cost, monthly payment, and total interest at APR minus 3%, your chosen rate, and APR plus 3%, with your rate highlighted. This makes the financial impact of a small difference in interest rate visible in both daily and total terms, which is useful context for evaluating whether a lower-rate alternative would meaningfully change the cost of borrowing. How APR affects the daily cost
- The term trade-off panel shows the daily cost, monthly payment, and total interest at one year shorter, your chosen term, and one year longer, with an insight sentence showing the monthly saving from extending versus the total extra cost. This captures the essential tension in term selection: a longer term reduces monthly payments but increases total interest, and the daily cost figure makes the total cost impact visible alongside the monthly payment. The term trade-off: monthly payment versus total cost
- The repayment equivalent panel shows what the total interest, directed as a monthly saving over the loan term, would accumulate to at 4% and 7% illustrative return rates. This is an opportunity cost frame: it shows what the interest paid would have been worth as a saving or investment, not as a reason to avoid borrowing, but as a way of making the full cost concrete. Frequently asked questions
True daily cost of borrowing
What does your loan actually cost per day — and how does that figure compare to everyday spending?
Daily cost of borrowing
£0.00
every day for 3 years
About this tool
What it calculates
Total interest, monthly payment, and daily cost across your loan
Enter a loan amount, annual percentage rate (APR), and term in months. The tool calculates the monthly payment using the standard annuity formula, the total interest as total payments minus principal, and the daily cost as total interest divided by the number of days in the term. A bar chart shows total interest at every half-year increment from 1 to 7 years at the same APR, with your chosen term highlighted.
Key features
Everyday comparisons, rate and term sensitivity panels, and opportunity cost
Four everyday comparison cards translate the daily cost into familiar spending equivalents. The rate sensitivity panel shows costs at APR minus 3%, current APR, and APR plus 3%. The term trade-off panel compares one year shorter, your chosen term, and one year longer. The repayment equivalent panel shows what the total interest, saved monthly over the term, would accumulate to at 4% AER and 7% illustrative return.
How to use the true daily cost of borrowing calculator
The tool works best when used with the actual APR of a specific loan you are considering, rather than a round number. The difference between an 8% and a 10% APR on a meaningful loan amount produces a material change in total interest that the daily cost figure makes concrete.
Enter the loan amount, APR, and term
Enter the loan amount you are considering borrowing or comparing. Use the annual percentage rate (APR) as stated on any loan illustration or offer document: APR is the standardised cost measure required under FCA rules and is the correct figure to use for comparison. Do not use a monthly rate or a flat rate as these will produce an incorrect total interest figure. Set the term in months: 12 months is one year, 36 months is three years, 60 months is five years.
Read the headline figures and everyday comparisons
The headline panel shows the monthly payment, total interest, and daily cost. The daily cost is total interest divided by the number of days in the term: it is not a daily charge on the loan but a way of expressing what the total interest amounts to per day over the life of the loan. The four everyday comparison cards below use illustrative unit costs to show what that daily figure equates to in familiar spending terms. All unit costs are labelled as illustrative.
Use the rate sensitivity and term trade-off panels
The rate sensitivity panel shows what the same loan would cost at three percentage points lower and three percentage points higher than your chosen APR, with the current rate highlighted. This makes the financial value of securing a lower rate visible in both daily cost and total interest terms. The term trade-off panel shows the same loan at one year shorter and one year longer, with an insight sentence below explaining the monthly saving from extending the term and the total extra interest that saving costs.
Review the bar chart and the repayment equivalent panel
The bar chart shows total interest at every half-year increment from 1 to 7 years at the current APR, with your chosen term highlighted in full navy. The visual makes the relationship between term length and total interest cost clear across the full range. The repayment equivalent panel shows what the total interest, divided by the term in months and saved as a monthly amount at two return rates, would accumulate to by the end of the loan term.
What the daily cost figure actually means
The daily cost is calculated by dividing the total interest by the number of days in the loan term. It is not a fee charged each day, and it does not reflect how interest accrues on the loan balance, which happens through a monthly compound process applied to the reducing balance. The daily cost is instead a way of expressing the total interest burden in units that are easier to compare against everyday spending decisions. Total interest of £1,800 on a 24-month loan is £2.47 per day. That figure connects the abstract total to something more tangible: whether that daily cost represents good or poor value for the benefit the loan provides is a judgement that depends on the purpose of the borrowing, the alternatives available, and the individual’s financial circumstances.
The everyday comparison cards extend this to specific familiar costs. Seeing that a loan’s daily interest equates to one cup of coffee or two streaming service days gives a human-scale reference point that percentages alone do not provide. APR communicates the cost of borrowing accurately for comparison purposes, but it does not immediately convey what the total charge feels like in everyday terms. The daily cost does that conversion, at the cost of some precision, and the comparison cards make it concrete. All unit costs used in the cards are illustrative and are shown alongside the figure they are derived from.
How APR affects the daily cost and total interest
APR has a compounding effect on total interest: a higher rate increases the monthly interest charge on the reducing balance each month, which means a larger fraction of each payment goes toward interest and a smaller fraction reduces the principal. This slows the principal reduction slightly, which in turn means slightly more interest accrues in subsequent months. Over a multi-year term, the combined effect of a rate difference on total interest is typically larger than a simple multiplication of the rate difference by the balance might suggest.
The rate sensitivity panel makes this visible for your specific loan. At a 3 percentage point reduction in APR, the reduction in total interest is shown alongside the daily cost saving and the monthly payment reduction. This is the direct financial value of securing a lower rate, which is why comparing APRs across providers before committing to a loan is worth the time it takes. A 2 or 3 percentage point difference in APR on a £10,000 loan over three years typically represents several hundred pounds in total interest, which translates to a meaningful daily cost difference. The APR on any credit product must be shown on loan illustrations and offers under FCA requirements: comparing APRs across providers is the most reliable way to assess the true cost difference between options. For a broader explanation of how APR is calculated and what it includes, the guide to APR on secured loans covers the mechanics in detail.
The term trade-off: monthly payment versus total cost
Extending the loan term reduces the monthly payment because the same total to be repaid is spread across more months. This makes shorter-term borrowing less affordable on a monthly basis while making longer-term borrowing less expensive per month. The trade-off is that a longer term means more months of interest accruing on the outstanding balance, which increases the total interest paid. The monthly saving from a longer term is real but it comes at a cost in total interest that is also real, and the term trade-off panel in the tool shows both figures side by side so the exchange is explicit.
The insight sentence below the term trade-off cards quantifies this exchange: for example, extending the term by one year reduces the monthly payment by a specific amount but increases total interest by a specific amount. Whether that exchange is worthwhile depends on whether the monthly saving is genuinely needed to make the loan affordable within the household budget, or whether the shorter term is manageable and the lower total interest is worth the higher monthly commitment. There is no universally correct answer: the right term is the shortest one where the monthly payment is comfortably affordable given the full picture of income and outgoings. Using the monthly budget planner alongside this tool helps assess whether a given monthly payment fits within the overall budget.
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Ready to see what you could borrow?
Checking won’t harm your credit scoreFrequently asked questions
How is the daily cost calculated and what does it represent?
The daily cost is calculated as: total interest divided by the number of days in the loan term (term in months multiplied by 30.44, the average days per month). Total interest is the total amount repaid minus the original principal: total monthly payment multiplied by the number of months, minus the loan amount. The result is the average daily cost of the interest over the full term, expressed as a pound figure per day.
It does not reflect how interest actually accrues on any given day: on a standard repayment loan, interest is calculated monthly on the reducing balance, so the daily interest charge is higher in the early months when the balance is larger and lower in the later months as the principal reduces. The daily cost figure averages this across the full term, which means it is not the charge on any specific day but the average daily burden of the total interest over the life of the loan. It is a way of expressing total interest in a unit that connects more naturally to everyday spending decisions than a lump sum total does.
What is APR and why does the tool use it rather than the interest rate?
APR stands for Annual Percentage Rate. It is a standardised measure of the total cost of borrowing expressed as a yearly rate, and under FCA rules it must include the interest rate and any compulsory fees that form part of the cost of the loan. This makes it the appropriate measure for comparing the true cost of different loan products on a like-for-like basis. A loan with a low headline interest rate but high arrangement fees may have a higher APR than a loan with a slightly higher rate and no fees, and the APR is what captures this difference.
The tool uses APR because it is the figure lenders are required to disclose on loan illustrations, and it is the most reliable input for calculating what a loan will actually cost. For products where the rate is variable, the APR shown is typically the representative APR at the point of illustration, which reflects the rate available to at least 51% of successful applicants for that product. Your individual rate may be higher if your credit profile means you are offered a higher rate. Always use the actual APR stated on your personal offer rather than the representative figure used in marketing materials when making a specific cost calculation.
How does the repayment equivalent panel work and what is it showing?
The repayment equivalent panel divides the total interest by the number of months in the loan term to produce a monthly equivalent of the interest cost. It then runs a future value calculation on that monthly amount, as if it were saved consistently at two return rates (4% AER and 7% illustrative) over the same number of months. The result shows what the interest cost, if directed as a monthly saving rather than paid as interest, would have accumulated to by the end of the loan term.
This is an opportunity cost frame. It does not imply that borrowing is wrong or that the loan is not worth taking: the purpose of the loan may well justify the interest cost, and in many cases borrowing to achieve a goal sooner outweighs the cost of the interest. The panel exists to make the opportunity cost of borrowing concrete rather than abstract. Knowing that a loan’s total interest, if saved, would have grown to a specific figure is part of the full-cost picture of a borrowing decision. It sits alongside the daily cost, the rate sensitivity, and the term trade-off as a way of understanding what the total cost of the loan represents in different frames.
Does a lower monthly payment always mean a better deal?
No. A lower monthly payment typically results from either a lower interest rate (which reduces both monthly payment and total interest) or a longer term (which reduces monthly payment but increases total interest). These two mechanisms produce very different financial outcomes. A lower monthly payment from a lower rate is straightforwardly better on both measures. A lower monthly payment from a longer term reduces monthly affordability pressure but increases total cost, and whether the trade is worthwhile depends on whether the monthly saving is genuinely needed.
The term trade-off panel in the tool makes this explicit: it shows both the monthly saving and the total extra interest from extending by one year, so the exchange is visible in both directions. For most borrowers, the right term is the shortest one where the monthly payment is comfortably manageable within the full household budget, because the interest saving from a shorter term is real and permanent while the monthly budget pressure from a higher payment is a temporary constraint that resolves when the loan is repaid. Extending the term to reduce monthly pressure is a legitimate choice when genuinely needed, but knowing the total cost of doing so before committing to the longer period is part of making an informed decision.
Can I use this tool to compare two different loan offers?
Yes, and this is one of the most practical uses for it. Run the tool once with the APR and term of the first offer and note the total interest and daily cost. Then run it again with the APR and term of the second offer. The difference in total interest is the financial saving or cost of choosing one over the other. If the two offers have different terms as well as different rates, the total interest comparison captures both effects, since a lower rate over a longer term may produce a higher total interest than a higher rate over a shorter term.
For secured loans, the APR comparison should always use the figures shown on the European Standardised Information Sheet (ESIS) or the equivalent personal illustration, not a representative APR from an advertisement. The representative APR is the rate available to at least 51% of successful applicants: if your credit profile means you are likely to be offered a higher rate, the comparison should be based on the personalised rate offered to you rather than the headline figure. Checking eligibility before making formal applications allows you to see indicative personal rates without triggering a hard credit search that could affect your credit file.
Squaring Up
The daily cost figure does one thing: it translates total interest into a unit that connects more naturally to everyday decisions than a lump sum or a percentage does. Whether a loan’s daily cost represents good or poor value for the benefit it provides is not a question the tool answers, because that depends on the purpose of the borrowing, the alternatives available, and the individual’s circumstances. What the tool does is make the cost concrete across multiple frames: per day, per month, over the full term, relative to different rates, and relative to different term lengths.
The rate sensitivity and term trade-off panels are the most actionable parts of the tool for someone comparing specific offers. The difference in total interest between a 9% and an 11% APR on a £15,000 loan over four years is measurable and worth knowing before committing. The daily cost of that difference, expressed in familiar spending terms, makes the financial case for comparing APRs across providers more concrete than a rate comparison in isolation.
Ready to see what you could borrow?
Checking won’t harm your credit score Check eligibilityThis tool is for illustrative purposes only and does not constitute financial advice. All calculations use the APR and term entered and assume a standard fixed-rate repayment loan with no fees beyond the interest cost. The daily cost figure is an average over the full term and does not reflect the actual daily accrual of interest on a reducing balance. Everyday comparison unit costs are illustrative only. Rate sensitivity and term trade-off panels use simplified assumptions and actual loan costs will vary by lender, product, and individual credit profile. The repayment equivalent projections are illustrative: the 7% return is not guaranteed and investment values can fall as well as rise. APR figures used should be taken from a personal loan illustration or offer, not a representative rate from an advertisement. Actual outcomes will depend on your individual circumstances.
