Two loan offers for the same money can differ by thousands over their life while looking almost identical on the page. The reason is that the number lenders advertise — the monthly payment — is the one number that moves in the opposite direction to total cost.
A longer loan is not a cheaper loan
Stretch the same borrowing over five years instead of three and the monthly figure drops handsomely while the total repayable rises. Nothing about that is dishonest, and it is exactly why so much of this market leads with the monthly number.
The default figures in this calculator show it: offer B has the lower rate and the lower monthly payment, and costs over five thousand pounds more.
Ask one question of every offer: what is the total amount repayable, in pounds, over the full term? Then ask what happens if you clear it early.
Fees move it more than people expect
Arrangement fees, drawdown fees and broker fees are usually quoted separately from the rate and land in exactly the same place — your total. On a short facility a fixed fee can dwarf the interest entirely, which is how two loans at identical rates end up costing very different amounts.
And check the early repayment charge
If there is any chance you will clear the loan early — a good year, a sale, a refinance — the early repayment charge belongs in the comparison. It can quietly wipe out the saving you were chasing when you switched.
Common questions
Should I always take the cheapest total?
Usually, but not always. A higher total over a longer term can be the right call if the lower monthly payment is what keeps the business comfortable month to month — a cheaper loan you cannot service is not cheaper. What matters is making that trade knowingly rather than being steered into it by a quote that only shows the monthly figure.
What is APR and why do the numbers differ?
APR is meant to fold fees into a single comparable rate, which is why it is often higher than the headline interest rate. It helps, but it is not the whole picture for business lending, where fee structures vary enormously and some products are not quoted as APR at all. The total repayable in pounds is harder to disguise, which is why this calculator leads with it.
Does applying to several lenders hurt my credit?
A single application has a small, short-lived effect. Applying to a dozen in a fortnight is different: multiple hard searches in a short window are visible to every subsequent lender and read as distress, so a business that appears to have been turned down repeatedly becomes a worse risk. Ask for an indicative decision on a soft search where you can, and only submit full applications where you genuinely fit.