Daily rates, reducing balances, and worked examples — understand exactly how interest builds up on a UK personal loan before you sign anything.
5 min read • Cash Train editorial team
Most UK personal loans — including Cash Train's — charge interest using a daily reducing-balance method. That means:
This approach is also called amortisation. The loan is structured so that equal monthly payments fully repay both interest and capital by the final payment date.
Starting with the Cash Train Flex product at 49.9% APR, here is how to derive the daily interest rate used in each payment calculation:
That 56 pence accrues on the very first day. It sounds small — because it is. The compounding over 180 days (a 6-month loan) is what produces the total interest figure shown in the worked example below. Figures are indicative and subject to status and affordability.
Using the Cash Train Flex representative rate (49.9% APR, fixed), here is the complete picture for the standard representative example:
| Month | Payment | Interest | Capital | Balance |
|---|---|---|---|---|
| 1 | £95.21 | £20.35 | £74.86 | £425.14 |
| 2 | £95.21 | £17.30 | £77.91 | £347.23 |
| 3 | £95.21 | £14.13 | £81.08 | £266.15 |
| 4 | £95.21 | £10.83 | £84.38 | £181.77 |
| 5 | £95.21 | £7.40 | £87.81 | £93.96 |
| 6 | £95.21 | £3.82 | £91.39 | £0.00 |
Figures indicative and subject to status and affordability. Representative example: borrow £500 over 6 months at 49.9% APR (fixed), monthly repayment £95.21, total repayable £571.26.
Notice how the interest column shrinks — from £20.35 in month one down to £3.82 in the final month. That is the reducing-balance effect in action. The total payment stays the same (£95.21), but as interest falls the capital repaid each month grows.
This is important if you are comparing a personal loan with a credit card or an overdraft, where minimum payments can mean you are barely covering interest and the balance barely moves. A fixed-term amortising loan guarantees the debt is gone by the final payment.
Cash Train offers three product tiers. The same daily-rate maths applies to all three — the APR is simply higher or lower, which changes how fast interest accrues. All figures are subject to status and affordability.
Range: £100–£5,000. Your available tier, rate, and term are personalised at the point of application based on a full credit and affordability assessment.
All the maths above collapses into one figure you should focus on when deciding whether to borrow:
For the representative example above that is £571.26 — meaning the loan costs £71.26 in total interest across six months. Knowing that number before you apply lets you ask a simple question: is resolving the expense I need to cover worth £71.26?
Cash Train shows the total repayable in the calculator before you register — not buried in the small print after you have committed.
Cash Train shows you exactly what you will repay — upfront, in the calculator, before you register.
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