How to compare personal loans: APR, term and total cost

2 min read · 8 steps · Updated 3 October 2026

A personal loan is a lump sum that you repay in fixed monthly instalments over a set time, usually one to five years, without putting up your home or car as security. Two loans with the same monthly payment can differ by thousands in total cost. Here is how to see the difference.

This is general information, not financial advice. Interest rates, fees and consumer rights differ from country to country, so read the terms of your own card or loan.

Step by step

1. Ask whether you need to borrow

   Borrowing makes sense for something necessary that you can repay without strain. For something that can wait, saving first is always cheaper. Never borrow to cover everyday bills without getting debt advice.

   Done

2. Compare the APR

   The annual percentage rate (APR) puts interest and compulsory fees into one figure, so it is the number to compare, not the bare interest rate.

   Done

3. Be wary of the advertised rate

   The rate in the advert is a representative rate. In the UK, only 51 percent of accepted applicants have to get that rate or better. The rest pay more. Your own rate depends on your credit record and income.

   Done

4. Look at the total amount repayable

   Every offer must state the total you will pay back. Subtract the loan amount to see what the loan costs you in money.

   Done

5. Choose the shortest term you can afford

   Spreading a loan over more years lowers the monthly payment and raises the total interest. Pick the shortest term whose payment fits safely into your budget.

   Done

6. Check fixed or variable

   Most personal loans have a fixed rate and a fixed payment. With a variable rate the payment can rise, which makes planning harder.

   Done

7. Check without harming your credit record

   A full application leaves a mark on your credit file, and several in a short time look bad. Use eligibility checkers or request conditions with a soft search first. In Germany that is the Konditionsanfrage, which does not affect your Schufa score.

   Done

8. Read the rules on early repayment

   Ask what it costs to repay early or make extra payments. In the UK and the EU the charge is capped, at 1 percent of the amount repaid early, or 0.5 percent in the last year of the loan.

   Done

Good to know

In the EU and the UK you can withdraw from a consumer loan within 14 days of signing. You then repay the money plus interest for the days you had it.

Refuse extras you did not ask for, such as payment protection insurance, unless you have checked that you need it. It can add a large amount to the cost.

Run the numbers with our free loan calculator: change the term and watch the total interest.

Related: Schufa in Germany, how to pay off debt faster and how to build an emergency fund, which makes the next loan unnecessary.

In short: Compare APR and total amount repayable, not the monthly payment. Shortest affordable term, fixed rate, soft search first, check early repayment charges, 14 days to withdraw.