How to use the loan comparison calculator
- Enter the amount, rate, term and upfront fees for the first two loan offers.
- Add up to two more loans if you have them.
- For each loan, say whether the fees are added to the loan or paid upfront.
- Compare the payment, interest, total cost and estimated APR. The cheapest loan is highlighted.
Worked example
$20,000 over 60 months: 8% with no fee vs 7% with an $800 fee
Loan A pays $405.53 a month with $4,331.62 interest. Loan B pays $396.02 with $3,761.48 interest, but adding the $800 fee brings its cost of borrowing to $4,561.48. Loan B has the lower payment, yet Loan A is cheaper overall; Loan B’s estimated APR is about 8.73% against 8.00%.
How it works
Each loan is amortized with the formula M = P × r / (1 − (1 + r)−n). Cost of borrowing = total interest + fees. The APR estimate finds the monthly rate i that solves Σ M / (1 + i)t = amount received (amount minus fees paid upfront, or the amount when fees are added to the balance), via Newton’s method with bisection, then multiplies by 12.
Assumptions
- Rates, terms and fees are user-supplied from your offers.
- Fixed rates with equal monthly payments.
- When loan amounts differ, the loan with the lowest APR is highlighted instead of the lowest total cost.
Frequently asked questions
Why can a lower rate cost more?
Upfront fees add to the cost. A loan with a slightly lower rate but a large fee can cost more over the term, which the APR estimate captures.
How is this APR different from the rate?
The interest rate applies to the balance. The APR also spreads fees across the term, expressing the whole cost as one annual rate.
Can I compare loans with different terms?
Yes. A longer term usually lowers the payment but raises total interest. Look at both the payment and the cost of borrowing.
Limitations
- Does not compare variable-rate loans, balloon payments or early repayment penalties.
- The APR is an estimate, not a regulatory disclosure.