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Calculator · Flat rates cost nearly double

Is this loan worth it?

The true cost of a loan, flat or reducing balance, fees included. Then the answer that matters: does it pay for itself, can your income carry it, or does it beat the loan you already have?

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The offer
₦
% a year

If the lender quotes a monthly rate, multiply by 12.

months

How the lender charges interest

₦

Processing, management, insurance, legal.

₦

Account, insurance or service charges each month.

Copy the numbers from the offer letter. An example is filled in.

What the loan is for
₦

Before the repayment. Be honest: use the profit, not the sales.

What if you negotiated

Lenders expect you to ask. A few points off the rate adds up over the term.

Scenarios

Save up to three scenarios and compare them side by side.

Saved on this device only.

Is this loan worth it?

₦2,000,000 over 24 months at 28% reducing balance

Send

You would pay each month

₦0a month

Total interest
₦0
Fees
₦0
Cost of borrowing
₦034% of the loan
True annual rate
30.2%reducing balance, fees in

The verdict

Repayment
₦109,777
Extra profit
₦180,000

Worth it. The extra ₦180,000 a month covers the ₦109,777 repayment 1.6 times over, leaving ₦70,223 a month. Over 24 months you come out ₦3,645,352 ahead after interest and fees.

Where every naira you repay goes

  • The money you borrowed₦2,000,000
  • Interest₦634,648
  • Fees₦40,000

How we worked it out

Each month, interest of 2.3% is charged on what you still owe and the rest of the ₦109,777 repayment reduces the balance, so interest falls every month: ₦634,648 in all.

The true annual rate is the reducing-balance rate that would produce the same repayments once ₦40,000 of fees is counted and the ₦40,000 taken up front is removed from what you actually receive.

Next step

Want a lender to say yes?

Our finance advisory team restates the true cost, negotiates terms and builds the cash plan that keeps repayments covered. Pair it with a plan a bank will read.

Talk to finance advisory Business Plan Builder
Assumptions and limits (5)
  • Level monthly repayments starting one month after the loan is paid out. Moratoriums, balloon payments and daily interest are not modelled.
  • Fees are taken as entered. Many offers add insurance and management fees that only appear in the offer letter: ask for every charge in writing.
  • The earning verdict uses extra profit, not extra sales, and assumes it starts in month one.
  • Affordability uses take-home income after tax and pension. Advisers generally want all repayments below 35% of it.
  • Nothing here is a recommendation to borrow or not to borrow; it shows the arithmetic so you can decide.

An estimate for general information, not professional advice. Nothing you type is stored or sent anywhere. Rates last checked 13 October 2026.

Flat rate or reducing balance?

Two loans can carry the same headline rate and cost very different amounts. A reducing-balance loan charges interest only on what you still owe, so the interest falls every month as you repay. A flat-rate loan charges interest on the full original amount every month, even in the last month when you owe almost nothing. Over the same term, a flat rate costs close to twice as much interest as a reducing-balance rate with the same number. Many microfinance, cooperative and buy-now-pay-later offers are quoted flat. Ask which it is before you sign.

Fees count too

Processing, management, insurance and legal fees are usually taken before you receive the money, so you receive less than the amount you repay on. The tool folds every fee into one true annual rate, so two offers can be compared side by side.

When a loan is worth it

A loan for stock, equipment or a contract is worth taking when the extra profit it brings in comfortably covers the repayment, with room for a slow month: advisers look for extra profit of at least 1.25 times the repayment. A loan for living costs is affordable when all your repayments together stay below about a third of your take-home income. A refinance is worth it when the new loan, after its fees, costs less than finishing the old one.

Before you sign

Floray's finance advisory team reads loan offers, restates the true cost, negotiates terms and builds the cash plan that keeps repayments covered. Talk to finance advisory, or track your debts in a free account and see the fastest way to clear them.

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