True cost of borrowing (APR) calculator

What this calculator does

Business finance is quoted in a confusing mix of ways — a flat rate, a monthly rate, a "factor rate", a fee, or simply a single total repayable figure. Two offers can look similar and cost very differently. This calculator translates any quote into the one number that lets you compare fairly: the true annual cost, alongside the total amount repayable and the pure cost of credit in pounds.

Enter the amount advanced, the term, the interest or fees, and any arrangement or admin charges. The tool returns what you'll actually repay over the life of the facility and the effective annual percentage rate behind it — so a 12-month deal and a 6-month deal can be judged on the same footing.

How to use it

Gather the full quote, not just the headline rate, then enter:

1. Amount borrowed — the sum actually advanced to you.
2. Term — in months. Shorter terms cost less in total but more per month.
3. Rate or total interest — whatever the lender has stated. If you only have a total repayable figure, enter that.
4. Fees — arrangement, admin, broker or early-settlement charges. These belong in the true cost; leaving them out is how a cheap-looking deal becomes an expensive one.

Run the same numbers for each competing offer and compare the APR and total cost side by side, never the monthly payment alone.

How to read the result

Three figures matter. Total repayable is the all-in amount leaving your account. Cost of credit is that figure minus the amount you borrowed — the actual price of the money. APR expresses that price as a standardised annual rate, including fees and the effect of repaying over time.

APR is the great equaliser. A flat rate always understates the real cost because you pay interest on the original balance even as you repay it down. A low monthly payment can hide a long, expensive term. By converting everything to one annualised, fee-inclusive percentage, the calculator lets you say plainly which offer is cheaper — and by how much.

The formula in plain English

Start with the simple parts:

Total repayable = amount borrowed + total interest + all fees

Cost of credit = total repayable − amount borrowed

APR is more involved. It's the annual rate that makes the present value of every repayment equal the amount you actually received, with fees folded in. In other words, it answers: "if this were a single annual interest rate applied honestly to a reducing balance, what would it be?" Because it accounts for both fees and the timing of payments, the APR is almost always higher than a quoted flat or monthly rate — which is precisely why it's the figure worth comparing.

Worked example

A company borrows £30,000 over 12 months at a quoted flat rate of 9%, with a £600 arrangement fee.

Flat interest = 9% of £30,000 = £2,700. Total repayable = £30,000 + £2,700 + £600 = £33,300, so the cost of credit is £3,300. That 9% flat headline, once you account for repaying the balance monthly and add the fee, works out to a true APR closer to 20%. The flat figure nearly halved the apparent cost. These numbers are illustrative, not a Credicorp quote — but they show why the headline rate alone can never tell you whether a deal is good.

Limitations to keep in mind

APR makes offers comparable, but it isn't the only thing that matters. A higher-APR facility that's flexible, fast, or lets you settle early without penalty may suit a short, urgent need better than a cheaper but rigid term loan. Always read the cost and the terms together.

The calculator also relies on the figures you feed it — hidden or conditional fees it can't see will understate the true cost, so press the lender for the full breakdown. Use it alongside the loan comparison calculator to line up offers, and the return on borrowing calculator to check the cost is justified by what the money will earn. This is general information, not financial advice.