Annuity Loan Calculator
An annuity (capital repayment) loan keeps the same monthly payment for the whole term. Work out the fixed monthly repayment and total interest instantly.
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What an annuity loan is
An annuity loan (also called a capital-and-interest or repayment loan) has the same payment every month for the whole term. Early on, most of each payment is interest; as the balance falls, more of it repays the capital. This is how nearly all UK personal loans and repayment mortgages work.
The level payment is worked out with the annuity formula M = P × r × (1+r)n / ((1+r)n − 1).
Annuity versus reducing-balance
With a reducing-balance (equal-capital) loan you repay the same amount of capital each month plus interest on the balance, so payments start higher and fall over time. An annuity loan spreads the cost into equal instalments, which is easier to budget but pays slightly more total interest early on. The calculator's total interest lets you compare the two.
Frequently asked questions – Annuity Loan Calculator
An annuity loan keeps the monthly payment level for the whole term. A reducing-balance loan repays equal capital each month, so payments start higher and fall. Annuity is easier to budget; reducing-balance can cost slightly less interest overall.
Interest is charged on the outstanding balance, which is largest at the start. So early payments are mostly interest and little capital. As the balance falls, the interest portion shrinks and more of each payment clears the debt.
Yes. A UK repayment mortgage uses exactly this annuity method. Enter the loan amount, rate and term and you'll get the monthly repayment, though a mortgage illustration will also include product fees.