Loan Comparison Calculator

How the comparison works

Each offer is run through the same amortization engine with the same assumptions. The only differences between the results come from the loans themselves.

Total borrowing cost is the headline comparison: every dollar you pay beyond the money you borrowed. In US disclosure rules, loan fees and points are part of the finance charge, which is why they belong in the comparison next to interest.

Worked example

Three offers for the same $20,000, with fees paid at closing. These are the calculator's defaults:

Loan B is the cheapest despite its upfront fee: its lower rate saves more interest than the fee costs. Loan C has by far the lowest payment, $325.86 a month, yet costs $2,933.33 more than Loan B. It stretches the debt over 84 months at a higher rate.

A lower monthly payment is not the same as a cheaper loan. Compare the total borrowing cost, then check that the payment fits your budget.

Fees paid upfront or added to the loan

Lenders handle fees in two common ways. Either you pay them at closing (or they are deducted from the money you receive), or they are added to the balance and repaid with interest. To keep the comparison fair, one setting applies to every loan.

With Loan B's $600 fee added to the balance, it borrows $20,600. The payment becomes $411.80 and the total borrowing cost becomes $4,708.26, compared with $4,588.53 when the fee is paid upfront. That is because interest is now charged on the fee too.

Fee-adjusted APR

The fee-adjusted APR answers this question: at what yearly rate would the money you actually receive grow into the payments you make? Upfront fees reduce what you receive, so they push this rate above the stated APR. The calculator finds the rate numerically, using the same actuarial idea behind the APR rules in Regulation Z, Appendix J. In the EU, the Consumer Credit Directive uses a comparable “annual percentage rate of charge”.

In the example, Loan B's 7.4% stated APR becomes about 8.69% once the fee is included. This figure is an estimate for comparison. It is not a legal APR disclosure, which may include charges this calculator does not know about.

Total cost and fee-adjusted APR usually agree. When they don't, it is because of timing: a fee paid today weighs more in the rate than the same amount of interest paid years from now. Total cost adds dollars regardless of when they are paid.

How to read your results

• Lowest total cost is the offer that costs the least in interest and fees over its full term, assuming you keep it to the end.
• Lowest monthly payment often belongs to the longest term. Make sure the cheaper loan's payment fits your budget with room to spare.
• If you expect to pay a loan off early, upfront fees matter more: you pay the whole fee but save some of the interest. Use the early loan payoff calculator to test that scenario.
• When loan amounts differ, total cost is not a like-for-like comparison. A bigger loan costs more but also gives you more money. Compare equal amounts where possible.

Assumptions

• Fixed rates; monthly compounding at APR ÷ 12; payments at the end of each month.
• Every loan runs for its full term with no extra payments.
• The origination fee is a percentage of the loan amount; other fees are a fixed amount. One setting decides, for all loans, whether fees are paid upfront or financed.
• Interest is rounded to the cent each month; the last payment clears any rounding difference.
• The fee-adjusted APR uses the regular payment for every month and is rounded to two decimals.

Limitations

• Variable-rate loans, introductory rates and balloon payments are not modeled.
• Optional products (payment protection, insurance), late fees and prepayment penalties are not included.
• The time value of money is reflected only in the fee-adjusted APR, not in the totals.
• Offers are only comparable when they are real, written quotes for the same purpose and amount.

Frequently asked questions