Loan Comparison Calculator
Compare two loan offers side-by-side by monthly payment or total interest paid. Use it when shopping for mortgages, auto loans, or personal loans to see which deal actually costs less over time.
About this calculator
Every fixed-rate loan payment is calculated using the standard amortization formula: Monthly Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (term in years × 12). Total cost = Monthly Payment × n. A lower interest rate reduces both the monthly payment and total interest paid, while a shorter term raises the monthly payment but dramatically cuts total interest. This calculator applies the formula to both loans simultaneously so you can compare apples to apples. Choosing by monthly payment alone can be misleading — a longer term lowers payments but can cost thousands more in interest.
How to use
Compare two $15,000 auto loans. Loan 1: 6% APR, 48 months. Loan 2: 7.5% APR, 60 months. Loan 1 — r = 6%/12 = 0.005; n = 48. Payment = $15,000 × [0.005 × (1.005)⁴⁸] / [(1.005)⁴⁸ − 1] = $352.28/month. Total cost = $352.28 × 48 = $16,909. Loan 2 — r = 7.5%/12 = 0.00625; n = 60. Payment = $15,000 × [0.00625 × (1.00625)⁶⁰] / [(1.00625)⁶⁰ − 1] = $300.57/month. Total cost = $300.57 × 60 = $18,034. Loan 1 costs $1,125 less overall despite the higher monthly payment.
Frequently asked questions
Why does a lower monthly payment not always mean a cheaper loan?
A lower monthly payment usually results from a longer repayment term, but extending the term means paying interest for more months, which increases total interest paid significantly. For example, a $15,000 loan at 7.5% over 60 months costs about $3,034 in interest, while the same loan over 36 months at the same rate costs roughly $1,827. The shorter-term loan saves over $1,200 despite having a $140 higher monthly payment. Always compare total cost, not just the monthly figure.
How does APR differ from interest rate when comparing loans?
The interest rate is the base cost of borrowing, expressed as a percentage of the principal. APR (Annual Percentage Rate) includes the interest rate plus lender fees (origination fees, closing costs, points) rolled into a single annual percentage. For an apples-to-apples comparison, always use the APR rather than the stated interest rate, because a loan with a lower rate but high fees can cost more than a loan with a slightly higher rate and no fees. Lenders are required to disclose APR under the Truth in Lending Act.
When should I choose a shorter loan term even if the payment is higher?
Choose a shorter term when you can comfortably afford the higher payment and want to minimize total interest paid, pay off the debt faster to free up cash flow, or build equity more quickly (especially in home loans). A shorter term is also wise when you expect a major financial change — like retirement — that would make higher payments difficult later. The rule of thumb is: if the monthly payment difference is less than 10–15% of your discretionary income, the total interest savings from a shorter term usually justify the higher payment.