Glossary

Total cost of credit

The total cost of credit is everything you pay to borrow money over and above the amount you receive: interest plus every compulsory fee, expressed as one figure.

2 min read

All-inInterest + every fee

One numberBest for comparing

Definition

Total cost of credit is the sum of all charges on a loan — interest, arrangement fees, admin fees and any other mandatory cost — measured against the amount advanced. It is the single most useful number for comparing finance, because it ignores how the cost is dressed up as a rate, a flat rate or a factor.

In plain terms

If you borrow £20,000 and repay £23,400 in total, your total cost of credit is £3,400 — regardless of how the lender describes the rate. That is the number to line up against every other quote.

Why it matters for your company

Comparing on total cost of credit stops you being fooled by clever rate quoting. Ask every lender for it in writing, and see the true cost of borrowing.