Calculation details
Planning estimate only, not financial, tax, or legal advice. Verify assumptions and current rules before making decisions.
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Use this result
Share the current inputs or ask ChatGPT to explain the calculation in context.
What does this calculator estimate?
A $20,000 loan at 6 percent for 5 years pays about $387/month, while 7 percent for 4 years pays about $479/month. Monthly payment = principal x [r x (1+r)^n] / [(1+r)^n - 1].
- Monthly payment uses the standard amortization formula with r = annual rate / 12 (Investopedia).
- Total cost = monthly payment x months + fees.
- A lower APR with a longer term can still cost more in total interest.
What loan comparison measures
This compares two loans by their real, all-in cost. A lower rate with a longer term can cost more overall than a higher rate with a shorter term, so comparing the total cost (not just the payment) is what matters.
Limitations to watch for
The comparison assumes both loans have the same principal and are fixed-rate. It uses your entered rate, term, and fees. Fees, closing costs, and origination charges can change the true cost — a loan with a lower rate but high fees can be more expensive in total.
How to use it in practice
Compare total cost, not just the monthly payment. Factor in any fees up front, and consider your time horizon — how long you'll actually keep the loan. A slightly higher payment on a much shorter term can save a lot of interest.
- Enter the rate, term, and fees for both loans.
- The calculator computes each loan's monthly payment, total cost, and total interest.
- The lower total-cost loan is flagged as the better option.
How this calculator works
Formula
Each loan's monthly payment = principal × [r × (1+r)^n] ÷ [(1+r)^n − 1], where r = annual rate ÷ 12 and n = term in months; total cost = monthly payment × n + fees. The calculator compares two loans by monthly payment, total cost, and interest.
Worked example
A $20,000 loan at 6% for 5 years (60 months) pays about $387/month, while the same amount at 7% for 4 years pays about $479/month — the calculator compares the full total cost including fees.
Assumptions to verify
- Both loans share the same principal amount.
- Each loan is a fixed-rate amortizing loan.
- Fees are added to the total cost for comparison.
Frequently asked questions
How do I compare two loans?
Compare the total cost (all payments + fees), not just the monthly payment. A shorter term or lower fees can beat a lower rate on total cost.
How is a loan payment calculated?
M = P × [r(1+r)^n] ÷ [(1+r)^n − 1], where r is the monthly rate and n the number of payments.
Which is more important, rate or term?
Both. A lower rate cuts cost, but a shorter term cuts interest dramatically even at a higher rate. Compare the combined effect.
Do fees change the comparison?
Yes — origination fees and closing costs are part of the true cost. A lower-rate loan with high fees can be more expensive overall.
Should I pick the lower payment?
Not automatically. A lower payment often means a longer term, which increases total interest. Compare total cost.
What is total interest?
The sum of all interest you'd pay over the loan's life — the real cost of borrowing. It's often more than the loan itself for long auto loans.
Is a fixed or variable rate better?
It depends on your risk tolerance and horizon. Fixed gives predictable payments; variable can start lower but rise. Compare total cost under both scenarios.
Cite this tool
BoringToolsKit. “Loan Comparison Calculator.” boringtoolskit.com/loan-comparison-calculator/ (reviewed 2026-08-25). Free to reference in articles, syllabi, and answer posts with a link.
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