Total cost of credit: seeing past the monthly

2 min read

TotalAll repayments minus principal

≠ monthlyThe payment can mislead

CompareLike-for-like across offers

Amount borrowed (£)

Arrangement & other fees (£)

Annual interest rate (%)

Term (months)

Estimates an annualised cost including fees so you can compare offers like-for-like. Illustrative, not a statutory APR.

What total cost of credit means

The total cost of credit is simple: add up everything you will repay over the life of the loan, subtract the amount you borrowed, and what remains is the cost. It captures interest and any mandatory fees in one honest figure — unlike the monthly payment, which can be made to look small just by stretching the term.

Why the monthly payment deceives

Two loans with identical monthly payments can cost wildly different amounts if their terms differ. A £20,000 loan at £900 a month over 24 months costs far more in total than the same £900 over 24 months at a shorter... the point is that only the full total, read alongside the APR, lets you compare fairly.

Fees are part of the cost

An arrangement fee, a drawdown fee or an early-settlement charge all add to what the loan really costs. A headline rate that excludes fees flatters the lender. Always ask for the total repayable, in pounds, before you sign.

Using APR to compare

The APR exists precisely to make loans comparable — it folds interest and mandatory fees into one annualised percentage. Compare APRs for a quick like-for-like, then confirm with the pound total for the amount and term you actually want.

Work out your total

Use the calculator to see the total repayable and the cost of credit for any amount, rate and term.

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.

Frequently asked questions

What is the difference between interest and total cost of credit?

Interest is the charge for borrowing; total cost of credit is interest plus any mandatory fees. The total is the truer measure because it captures everything you pay above the sum borrowed.

Why can two loans with the same rate cost different amounts?

Because the term and fees differ. A longer term accrues more interest even at the same rate, and fees vary. Always compare the total repayable in pounds, not just the headline rate.

Should I compare loans on APR or total cost?

Use both. APR gives a fast like-for-like comparison of the rate; the pound total for your exact amount and term confirms which loan actually costs less for your situation.