Cut Your Loan Costs Calculator
Our cut your loan costs calculator models three strategies to reduce the total interest on your existing loan: making regular overpayments; refinancing to a lower rate; or shortening the term. For many borrowers, one of these approaches can save hundreds or thousands of pounds.
Cut Existing Loan Costs
Find out how much you could save by refinancing your existing loan at a lower rate.
The Three Ways to Reduce Loan Costs
Overpayment is the simplest approach — every extra pound directly reduces the outstanding balance, cutting future interest. On a £12,000 loan at 10% APR with 36 months remaining, paying an extra £100 per month saves approximately £480 in interest and cuts the term by 7 months. Refinancing to a lower rate reduces the interest component of each payment — but only after checking early repayment charges. Use our Refinance Calculator to model the net saving, and our Personal Loan Calculator to compare the total cost at the new rate.
Frequently Asked Questions
Some lenders charge 1–2 months interest for early settlement. Loans regulated under the Consumer Credit Act allow unlimited overpayment with a maximum ERC of 58 days interest on amounts above £8,000.
Apply for a new loan at a lower rate and use the proceeds to settle the existing loan in full. Request a settlement figure from your current lender first — it includes any ERC.
Compare the loan APR against your savings AER. If your loan costs 10% and savings earn 4.8%, paying off the loan saves a net 5.2% — a guaranteed, risk-free return.
Many lenders allow full overpayment without any charge — check your credit agreement. Below £8,000, no ERC is permitted under Consumer Credit Act rules.
If your credit profile has worsened since taking the original loan, refinancing may not be possible. Focus on overpayment to reduce the outstanding balance and total interest, even without changing the rate.
Enter your current loan balance, APR, remaining term, and the new rate you could access. The calculator compares total cost on the existing loan versus refinancing. Key costs to include are any early repayment charge on the current loan (often 1-2 months’ interest) and any arrangement fee on the new loan. Check that savings are genuine once these costs are factored in — a lower rate with a £500 fee may not be cheaper than your existing loan over the remaining term. The refinance benefit is largest in the early months of a loan when the outstanding balance is highest. Late in a loan term, the remaining interest is small and refinancing savings are minimal.
Important Information
This calculator is provided for general information and planning purposes only. It does not constitute financial or tax advice and should not be relied upon as such. Figures are indicative estimates based on simplified, publicly available criteria and stated assumptions. Actual results depend on your full circumstances. See our Disclaimer for further information.