Loan Repayment Calculator

Why the quoted rate is rarely the real cost

The single most misleading number in Nigerian lending is the quoted rate. Banks use a reducing (amortizing) annual rate, which is honest, the interest is recalculated each month on the balance you still owe. But most loan apps do not. They quote a "flat" rate: interest charged on the ORIGINAL amount every single month, even as you pay the balance down. A 1.5% flat monthly rate is not 18% a year; because you are paying interest on money you have already repaid, it works out closer to 35% a year. Some apps skip the pretense and quote a daily rate, 0.5% per day sounds small but annualizes to over 400%.

A worked example: what "1% per day" really costs

Take the default: ₦100,000 borrowed for 30 days at 1% per day. The interest is 1% of the original amount for each of 30 days, ₦1,000 a day, ₦30,000 in total. So you repay ₦130,000 on a ₦100,000 loan, a 30% interest charge in a single month. To compare that with a bank quote, the calculator converts it to an effective APR of well over 2,000%, that is not the rate a bank would quote you, but it is the honest annualized cost of what you just agreed to. That is precisely the gap this tool exists to expose.

Why the effective APR is the number to trust

Every lender can phrase its rate differently: "1.5% flat", "0.5% per day", "30% per annum reducing". These three can look similar on paper yet cost wildly different amounts. The effective APR strips away the phrasing by solving for the single annual rate at which the present value of your repayments exactly equals the loan. That one figure lets you line up a bank, a loan app and a POS advance side by side. If a lender will not tell you the effective APR, that is usually a sign the real cost is higher than the headline suggests.

Remember the fees too

Interest is only part of the cost. Many Nigerian lenders also deduct an upfront processing fee, a mandatory insurance or technology charge, or a "commitment" fee, often 3-5% of the amount, taken before you even receive the money. Those are additional cost on top of the rates this calculator models, and a true all-in APR should include them. When a lender quotes you a figure, always ask for the full schedule: amount you receive, every charge, and the total you repay.

Before you borrow: what to ask the lender

Before you sign, get three things in writing. First, the effective APR, the single number this tool computes, and the one that lets you compare a bank to an app to a POS advance fairly. Second, the full repayment schedule: the exact installment, when it is due, and the total you will pay back including every charge. Third, what happens if you are late or fail to pay, the penalty rate, whether the lender reports to a credit bureau, and whether they can seize collateral or deduct directly from your account. A lender that is vague about any of these is usually the one to walk away from. A loan that looks cheap because of a small daily rate can be the most expensive money you ever borrow.

How this fits with the other money tools

A loan is one side of your balance sheet. To build the emergency fund that keeps you from borrowing in the first place, use our emergency fund calculator. To see how much of your take-home a repayment really eats, our 50/30/20 budget calculator and budget allocator show where the money goes. And to plan how fast you can free up cash to clear the debt, our savings goal calculator charts the monthly amount you need.

Loan repayment questions

What is a flat interest rate on a Nigerian loan?

A flat rate charges interest on the original loan amount every month, even as you repay the balance. So "1.5% flat per month" costs far more than 18% a year, the effective APR is usually close to double the simple rate-times-twelve figure.

Is a 5% monthly loan app rate expensive?

Yes. A 5% flat monthly rate on a short tenor typically annualizes to well over 100%. Even at a longer tenor it is far above the 25-35% a formal bank loan costs. Use the effective APR on this calculator to judge it honestly.

Does this calculator include loan fees?

It models the interest in the rate you enter. Upfront processing, insurance or commitment fees are separate and add to the true cost, include them when comparing a total.

How is the effective APR calculated?

The calculator finds the interest rate at which the present value of your repayments exactly equals the amount borrowed, then annualizes it. For example, ₦100,000 borrowed for 30 days at 1% per day costs about ₦130,000 to repay, an effective APR of about 2,333.9%. That is the honest way to compare loans with different quoted rates and terms.