Loan Comparison Calculator

How the loan comparison works

Both loans use the standard amortising payment formula:

PMT = P × r ÷ (1 − (1+r)⁻ⁿ)

with monthly rate r = APR ÷ 12 and n = years × 12. Total interest is simply payments made minus principal. Comparing offers on both axes at once matters because lenders trade them against each other: a longer term shrinks the monthly payment while quietly multiplying total interest, and a low rate on a long term can still cost more than a higher rate paid quickly.

Worked example

$25,000 borrowed. Loan A: 6.9% over 5 years → about $494/month and $4,631 total interest. Loan B: 5.4% over 4 years → about $580/month but only $2,853 interest. B costs $86 more per month and saves roughly $1,778 over the life of the loan. Whether that trade suits you depends on cash-flow headroom, not just the maths — but now the trade is visible and priced.

What the comparison leaves out

Fees matter: origination charges effectively raise the rate, so compare APR (which folds fees in) rather than nominal rate where possible. Prepayment penalties, variable-rate resets and insurance add-ons can also tilt a deal. And time value of money cuts both ways — a dollar of interest paid in year five is cheaper than one paid today, which is why paying points for a lower rate pays off only if you keep the loan long enough.

Frequently asked questions

1. How do I compare two loan offers?

Put both on the same amount, then compare three numbers: monthly payment, total interest, and fees (via APR). A loan can win on monthly payment and still lose badly on total cost — check both axes.

2. Is a lower monthly payment always better?

No. Longer terms lower the payment but usually raise total interest substantially. The comparison calculator shows exactly what each point of monthly relief costs over the loan's life.

3. What is the difference between rate and APR?

The rate prices the loan; the APR folds in most lender fees, making it the better apples-to-apples number between offers. A low rate with heavy fees can carry a higher APR than a slightly higher rate with no fees.

4. Can I compare loans with different terms here?

Yes — that is the point. Enter each loan's own rate and term; the calculator computes payments and lifetime interest independently for each and reports the cheaper overall.