Monthly repayment · 12 months
₦61,667/mo
You borrow₦500,000
Total interest+ ₦240,000
Total you repay₦740,000
Quoted rate (annualised)48.0%/yr
True cost, reducing-balance terms79.4%/yr
principal vs interest share of everything you will pay back
How this calculator works
Two loans can carry the same quoted percentage and cost wildly different amounts, because Nigerian lenders quote interest in two different conventions. Banks usually quote per annum on a reducing balance, where interest is charged only on what you still owe. Many consumer lenders and loan apps quote per month on a flat basis, where interest is charged on the full original amount every single month, even in month eleven when you have repaid most of it. This calculator computes both honestly and translates between them.
Enter the amount, tenor and the rate exactly as the lender quoted it, then pick the convention from the offer letter. The repayment card shows your monthly payment, total interest in naira, and two annual rates: the quoted rate annualised naively, and the true cost expressed in reducing-balance terms. That second number is the one to compare across lenders. A 4% per month flat loan over 12 months annualises naively to 48%, but its true reducing-balance cost is roughly 79% per year. The comparison chip prices that gap in naira on your exact loan.
The month-by-month schedule makes the difference visible: on a flat loan the interest column never falls even as your balance drops, while on a reducing-balance loan each payment shifts progressively from interest to principal. One honest limitation: this models interest only. Management fees, insurance, processing charges and early-settlement penalties all add to the real cost, so read the offer letter and add them in before you sign. Estimates only, not financial advice.
Frequently asked questions
How is a monthly loan repayment calculated?
For a reducing-balance loan, the repayment is a fixed annuity: each month interest is charged on what you still owe, and the rest of the payment reduces the balance. For a flat-rate loan, the lender charges interest on the original amount every month and adds an equal slice of the principal, so the payment is the principal divided by the tenor plus a fixed interest charge that never falls.
What is the difference between flat rate and reducing balance interest?
Reducing balance charges interest only on your outstanding balance, so the interest portion falls every month as you repay. Flat rate charges interest on the full original loan amount for the entire tenor, even though you owe less and less. At the same quoted percentage, a flat-rate loan costs far more, roughly 1.8 to 2 times the interest of a reducing-balance loan over a one-year tenor.
Why is the true annual rate higher than the quoted monthly rate?
A quote like 4% per month sounds like 48% per year, but on a flat basis the true cost is higher still, because you pay that 4% on money you have already returned. Converted to honest reducing-balance terms, a 4% per month flat loan over 12 months works out to roughly 79% per year. This calculator does that conversion for any quote you enter.
What interest rates do Nigerian lenders charge?
It varies widely. Commercial banks typically quote per annum on reducing balance, with rates that track the MPR. Digital lenders and loan apps usually quote per month, often on a flat basis, and short tenors can carry very high effective annual rates. Always check the offer letter for the convention used, and add any management, insurance or processing fees to the comparison, since this calculator models interest only.
Does paying off a loan early save interest?
On a reducing-balance loan, yes: interest stops accruing on whatever you repay, though some lenders charge an early-settlement fee. On a flat-rate loan, often not. The total interest was fixed on day one, and unless the lender explicitly rebates unearned interest, repaying early just returns their money faster. This is one of the most expensive details to miss in an offer letter.