How to use the loan comparison calculator
- Enter each offer's loan amount, interest rate, term in years and upfront fees. Name each one so the table is easy to read.
- Use Add a loan for up to four offers, or keep two.
- Compare the monthly payment, total interest, fees and total cost. The lowest total cost is highlighted.
- Look at the APR with fees, which folds the fees into an effective rate so offers with different fees can be compared fairly.
Formula
Payment = principal x r / (1 - (1 + r)^-n), with r the monthly rate and n the months
Total interest = sum of the monthly interest in a schedule rounded to cents
Total cost = total interest + upfront fees
APR with fees = the rate at which the payments have present value equal to the loan amount minus fees
The APR is found by repeated halving until the present value of the payments matches the money received, then multiplied by 12.
Worked example
Lender A offers $25,000 at 7.5% for 5 years with a $500 fee. The payment is $500.95, interest is $5,056.96 and total cost is $5,556.96. The APR with the fee is 8.36%.
Lender B offers the same amount at 6.9% for 7 years with no fee. The payment is $376.10 but interest is $6,592.01. B has the lower payment by $124.85 a month, while A costs $1,035.05 less in total.
Payment versus total cost
A lower monthly payment often comes from a longer term, which means more interest in total. Neither is always better. If your budget is tight, the payment matters most. If you can afford it, a shorter term usually saves money. Seeing both numbers side by side makes the trade off clear. For one loan in detail use the loan calculator.
Why APR with fees helps
Two loans with the same rate can differ in cost if one charges an origination fee. The APR spreads the fee across the term, so you can compare offers fairly. This is an effective rate you can compute for any set of payments, similar to the figure on a lender's disclosure. See the APR calculator for one loan and the debt consolidation calculator if you are combining balances.
Limits of the comparison
Offers with different amounts or terms give you different things, so the lowest cost is not automatically the best fit. Prepayment penalties, variable rates, insurance and taxes are not modeled. For the month by month detail, see the amortization schedule calculator.
Assumptions and limits
- Each loan has a fixed rate, level monthly payments and monthly compounding.
- Upfront fees are paid at the start and reduce the money you receive, which is how the APR treats them.
- Prepayment, late fees, variable rates, insurance and taxes are not modeled.
- Terms must be a whole number of months, and fees must be less than the amount.
Frequently asked questions
How do I compare two loans?
Compare the monthly payment, the total interest and the total cost including fees. Then check the APR with fees, which accounts for fees in a single rate.
Is a lower interest rate always cheaper?
Not always. A longer term or higher fees can make a lower rate cost more in total. That is why this tool shows total cost and APR with fees next to the rate.
What is the difference between interest rate and APR?
The rate is the cost of borrowing the balance. The APR also folds in certain fees, so it is usually a bit higher and better for comparing offers.
Can I compare loans with different terms?
Yes. The totals reflect each term. Just remember that the shorter loan frees you from payments sooner, which is not shown in a single total.