Not all loans are created equal. This calculator puts multiple loan offers side-by-side, revealing the true cost of each option beyond just the interest rate—so you can make the smartest borrowing decision.
How This Calculator Works
This calculator compares loan options head-to-head:
- Loan Amount: How much you're borrowing
- Loan Options: Enter details for 2-4 different loans
- Interest Rates: APR for each option
- Terms: Repayment period in months/years
- Fees: Origination fees, closing costs
- Total Comparison: Monthly payment, total interest, total cost
The Formula Explained
Monthly Payment = P Ă— [r(1+r)^n] / [(1+r)^n - 1]
Total Cost = (Monthly Payment Ă— Months) + Fees
Effective APR = Rate that accounts for fees in the total cost
Compare APR AND total cost—lowest rate doesn't always mean best deal.
Step-by-Step Example
Comparing $25,000 Auto Loan Options
| Lender | Rate | Term | Payment | Total Interest | Fees | Total Cost |
| Bank A | 5.9% | 60 mo | $483 | $3,981 | $0 | $28,981 |
| Bank B | 5.5% | 72 mo | $397 | $3,609 | $250 | $28,859 |
| CU | 4.9% | 60 mo | $471 | $3,280 | $0 | $28,280 |
Credit union wins despite lower payment at Bank B (longer term = more interest).
Frequently Asked Questions
Why shouldn't I just pick the lowest interest rate?
Interest rate is important but not the whole picture. A lower rate with higher fees or longer term may cost more overall. A 5% rate over 72 months costs more than 6% over 48 months in total interest. Always compare total cost, not just rate or payment.
What's the difference between rate and APR?
Interest rate is the base borrowing cost. APR (Annual Percentage Rate) includes rate plus fees, showing true annual cost. A 5% rate with $500 in fees on a $10,000 loan has an APR of ~5.5%. Always compare APR for accurate comparison, especially with mortgages.
Should I choose a lower monthly payment or shorter term?
Depends on your priorities. Lower payment: More cash flow flexibility, but more total interest. Shorter term: Higher payments, but less total interest and faster payoff. If you can afford higher payments, shorter terms save money.
How do I compare loans with different terms?
Calculate total cost for each: (Payment × Months) + Fees. A 48-month loan at 6% often beats a 72-month loan at 5% in total cost. Don't compare just monthly payments—that favors longer terms that cost more overall.
What fees should I look for when comparing loans?
Watch for: (1) Origination fees (1-8% of loan), (2) Application fees, (3) Document fees, (4) Prepayment penalties (rare now but check), (5) For mortgages: closing costs, discount points. Add all fees to total cost for true comparison.
Why might a higher-rate lender be better?
Scenarios where higher rate wins: (1) Lower fees offset rate difference, (2) Better terms (no prepayment penalty), (3) Added value (relationship benefits, flexibility), (4) Approval where others declined. Total package matters.
Should I consider multiple lenders or just my bank?
Always shop multiple lenders. A 0.5% rate difference on a $300,000 mortgage saves $25,000+ over 30 years. Get quotes from: your bank, credit unions (often lowest rates), online lenders, and specialized lenders. Mortgage shopping within 14-45 days counts as one credit inquiry.
How do I compare secured vs unsecured loans?
Secured loans (backed by collateral like car or home) typically have lower rates but risk asset loss if you default. Unsecured loans have higher rates but no collateral risk. Compare total cost considering your ability to handle both payment and potential loss.
Key Points to Remember
- Compare total cost: Not just rate or monthly payment
- Include all fees: Origination, application, closing costs
- Term matters significantly: Longer terms = more total interest
- Shop multiple lenders: Rate differences add up to thousands
- APR > Rate: APR includes fees for accurate comparison