Loan Comparison Calculator
Calculates and compares the monthly payment, total interest, and total cost for two loan scenarios using standard amortization. Enter the amount, interest rate, and term for each loan to see which one costs less over its lifetime.
Loan A saves you money over the life of the loan.
Why Loan Comparison Calculator Matters
A seemingly small difference in interest rate or loan term can mean thousands of dollars over a multi-year loan. A $20,000 loan at 6% for 60 months costs $23,199 total — the same loan at 8% for 48 months costs $23,420. The higher monthly payment option is also the higher-rate option, but by only $221 in total cost. What looks like a better deal on monthly payments often costs more overall. This calculator makes the true cost comparison immediate.
Example Calculation
You are comparing two auto loans for $20,000. Loan A: 6% APR, 60 months. Loan B: 8% APR, 48 months. Loan A: monthly payment = $386.66, total interest = $3,199.60, total cost = $23,199.60. Loan B: monthly payment = $488.26, total interest = $3,436.48, total cost = $23,436.48. Loan A saves $236.88 overall, but Loan B is paid off a full year sooner. The right choice depends on your cash flow versus your desire to be debt-free faster.
Practical Tips
- Compare total cost, not just monthly payment. Lenders advertise low monthly payments because a longer term looks more affordable — but more months means more interest. Always calculate total cost over the life of the loan.
- A 0.5–1% rate difference on a large loan over many years can cost or save over $1,000. Even small rate differences justify shopping around among at least 3–5 lenders before accepting an offer.
- Shorter terms mean higher monthly payments but dramatically less total interest. If your budget can handle it, a 36-month loan almost always beats a 60-month loan on total cost. Model both terms here to see the exact trade-off.
- Factor in origination fees and prepayment penalties when comparing. A loan with a 1% origination fee on $20,000 adds $200 upfront — that may shift which loan is actually cheaper. Total cost should include fees, not just interest.
Frequently Asked Questions
- The standard amortization formula is: payment = P × r × (1+r)^n / ((1+r)^n − 1), where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the loan term in months. For a zero-interest loan, payment = P ÷ n.
- Not necessarily. A lower monthly payment usually means a longer term, which means more total interest paid. For example, a $15,000 loan at 7%: 36 months = $463/month, $1,668 total interest. 60 months = $297/month, $2,827 total interest. The 36-month option has a higher payment but costs $1,159 less. Always compare total cost, not just monthly payment.
- The interest rate is the base cost of borrowing. APR (Annual Percentage Rate) includes the interest rate plus most fees — origination fees, points, etc. — expressed as a yearly rate. For a true apples-to-apples comparison, compare APRs, not nominal interest rates. This calculator uses the rate as entered, so input APR for a complete comparison.
- If you can afford the higher monthly payment, lowest total cost is almost always the right choice — it means less money paid to the lender over time. Choose the lower monthly payment only if cash flow is a genuine constraint, not just a preference. The extra interest paid on a longer loan is money you could have kept.
- Yes. Enter your current loan as Loan A (remaining balance, current rate, remaining months) and the refinance offer as Loan B. The savings output shows whether refinancing saves money over the remaining loan life. Remember to factor in any refinancing fees, which can offset the interest savings in the first year or two.
- You can enter different amounts for each loan — useful for comparing a larger loan at a lower rate vs a smaller loan at a higher rate, or comparing financing with a larger down payment. The calculator handles any combination of amount, rate, and term.
Disclaimer
These tools provide estimates for informational purposes only. Results should not be used as the sole basis for financial, business, or legal decisions. Always consult qualified professionals for advice specific to your situation.