Loan Comparison Calculator

Loan Comparison Calculator

Choosing between two loan offers can be confusing when they have different rates, terms, and amounts. This calculator places two loans side by side and reveals the monthly payment, total interest, and total cost for each so you can clearly see which deal saves you more money over the life of the loan.

How Loan Payments Are Calculated

Each loan uses the standard amortization formula: M = P[r(1+r)^n] / [(1+r)^n - 1] where M is the monthly payment, P is the principal, r is the monthly interest rate (annual rate / 12 / 100), and n is the total number of monthly payments. Total interest equals (Monthly Payment x n) - Principal. The calculator compares the total cost of both loans and identifies the better value.

Example

In this example, Loan B has a higher monthly payment but saves $1,163 in total cost thanks to its shorter term despite the higher rate.

Key Factors That Affect Loan Cost

• Interest rate — the most obvious factor, but a lower rate does not always mean a cheaper loan if the term is longer
• Loan term — shorter terms dramatically reduce total interest even at slightly higher rates
• Loan amount — even a small rate difference matters significantly on large balances
• Fees and origination costs — some loans include upfront fees that effectively raise the true cost
• Prepayment penalties — check whether early payoff triggers penalties, which can negate the benefit of a lower-rate loan

Tips

1. Always compare total cost (principal + total interest) rather than just the monthly payment to find the better deal
2. A shorter-term loan at a slightly higher rate often costs less overall than a longer-term loan at a lower rate
3. If cash flow is tight, choose the lower monthly payment but make extra payments when possible to reduce interest
4. Ask each lender for the APR (which includes fees) rather than just the stated interest rate for a true apples-to-apples comparison