How are my loan repayments calculated?

Updated 3 months ago

When you apply for a Zopa loan, you’ll be offered an annual percentage rate, also known as APR — which is the total cost of borrowing money for a whole year. 

Your monthly loan repayments are made up of capital (the money you borrowed) and interest (the cost of borrowing this money). Your repayments are calculated in a way that means you repay the total amount of money you owe in equal installments over your agreed loan term. While we’re unable to change your loan term, you can always make additional payments towards your loan, which will reduce your future monthly repayments. 

The interest on your loan is calculated daily based on the amount of capital you have left to pay. Your first loan repayment will be made up of more interest than capital. But over time, as the amount of capital you owe goes down, your monthly repayments will be made up of less interest and more capital. This doesn’t affect the amount of money you pay, we just thought you might like to know how things work behind the scenes!  

For example, say you take out a loan of £10,000 over 5 years with an APR of 22.9%. The amount of interest you’ll need to pay over the 5-year loan term is £6,164. This means that you’ll owe a total of £16,164, which will be split into equal repayments of £269.40 per month. Each of these monthly repayments will be made up of a different amount of capital and interest as time goes on, until the amount you owe is fully repaid.  

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