How to use this calculator
- Enter the Loan amount you want to borrow.
- Fill in Loan A interest rate, Loan A term in months and Loan A fees.
- Do the same for Loan B.
- Read the headline saying which loan is cheaper, then the table of payment, interest, total cost and APR.
What the comparison measures
For each loan the calculator computes the monthly installment, then the total interest over the full term, then adds the fees you pay up front. That gives the total cost of borrowing, the only number that compares offers fairly when rates, terms and fees all differ.
Cost = M · n − L + F- M = monthly payment = L · r(1 + r)^n / ((1 + r)^n − 1)
- L = loan amount
- r = monthly rate (annual rate ÷ 12 ÷ 100)
- n = number of months
- F = up-front fees
It also shows an APR, which converts the fees into a rate on the cash you actually receive, so a loan with a low rate but high fees is not flattered.
Example: $30,000, 60 months versus 72 months
Loan A is 7.5% over 60 months with no fees: $601.14 a month and $6,068 in interest. Loan B is 6.9% over 72 months with a $500 fee: $510.03 a month and $6,722 in interest, or $7,222 with the fee.
Loan B has the lower payment and the lower rate, but Loan A is cheaper overall by about $1,154. The longer term and the fee more than cancel the rate advantage, and the APR on Loan B including the fee works out at about 7.5%, the same as A's rate.
Rate, term or payment: what to look at
If you remove the fee from Loan B, A is still cheaper, but only by about $654. The difference then is entirely the extra 12 months of interest. A lower payment from a longer term is a trade: you get monthly room and pay for it in total cost.
Decide first what matters. If the budget is tight, a longer term may be right; if you want the lowest cost, pick the lowest total cost at a payment you can sustain. Use the loan calculator to explore terms for one loan, or the loan payoff calculator to see the effect of extra payments.
How to compare offers properly
- Use the same loan amount for both offers; if a lender requires you to borrow more, include that.
- Count every fee: origination, processing, insurance that is required, and so on.
- Look at the APR and total cost, not the rate alone; see the APR calculator.
- Check for prepayment penalties if you may repay early.
- Compare fixed with variable rates carefully; this tool assumes a fixed rate.
Assumptions and limits
Both loans are treated as fixed-rate, fully amortizing loans with equal monthly payments. Fees are paid up front and not financed. Promotional periods, variable rates, balloon payments, late fees and tax effects are not modeled.
The calculator compares costs, not your credit eligibility or the quality of the lender. Confirm the final terms in the lender's official disclosure before you sign.
Frequently asked questions
Which is better: a lower rate or a shorter term?
A shorter term usually saves more interest, but the payment is higher. Choose the shortest term whose payment fits your budget comfortably.
How do fees change which loan is cheaper?
Fees add directly to the total cost and raise the APR. A lower rate can still lose once a fee is included, as the example shows.
Should I compare monthly payments or total cost?
Look at both. The payment tells you if you can afford it each month and the total cost tells you what the loan really costs.
Can I compare more than two loans?
Run the calculator more than once, comparing your current best choice with each new offer in turn.