Loan Comparison Calculator
Amount & two offers
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- United States card and lending practice
- Scope and limitations
- Educational estimate only. Your issuer sets the minimum-payment formula, how a payment is allocated across balances, when interest is charged, and any fees or promotional terms — check your cardholder agreement for the figures that bind.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the loan amount.
- 02
Enter each offer's rate and term.
- 03
See which has the lower payment and lower total cost.
Formula
For each offer, compute the amortized monthly payment, then its total cost over the term: i = ratePct / 100 / 12 (the monthly interest rate) payment = (i == 0) ? amount / months : amount * i / (1 - (1 + i)^-months) months = years * 12 totalCost = payment * months Do this for both Loan A and Loan B on the same amount, then compare. The offer with the lower totalCost is cheaper overall, even if it carries the higher monthly payment or the higher rate. winner gap = | totalCost(A) - totalCost(B) |.
Example
Compare two offers on the same $25,000. Loan A: 7% over 5 years (60 months) i = 7 / 100 / 12 = 0.0058333 payment = $25,000 x 0.0058333 / (1 - (1.0058333)^-60) = $145.83 / 0.294595 = $495.03 per month totalCost = $495.03 x 60 = $29,702 Loan B: 6% over 7 years (84 months) i = 6 / 100 / 12 = 0.005 payment = $25,000 x 0.005 / (1 - (1.005)^-84) = $125.00 / 0.342265 = $365.21 per month totalCost = $365.21 x 84 = $30,678 Loan B has the lower rate (6% vs 7%) and the lower monthly payment ($365.21 vs $495.03, about $130 less every month), yet it costs more overall because you carry the balance for 24 extra months. Result: Loan A costs less by about $976 ($30,678 - $29,702), and the lower total cost is $29,702. The cheaper rate did not win, and neither did the smaller payment — which is exactly why the number on the dealer's sticker is the wrong one to shop on.
Definitions
- Amortization
- The process of spreading a loan's principal and interest into equal periodic payments so the balance reaches exactly zero at the end of the term. It fixes the monthly payment from the amount, rate and number of months.
- Total cost of credit
- Every payment you make on a loan added together. For an amortizing loan it equals the monthly payment multiplied by the number of months. It is the figure this tool uses to decide which offer is cheaper.
- Note rate (nominal rate)
- The stated annual interest rate a lender quotes and the figure used to amortize each offer here. It reflects interest charged on the balance but excludes any upfront fees.
- APR (annual percentage rate)
- A broader rate that folds required charges such as origination and certain closing fees into a single annualized figure, giving a fairer like-for-like cost than the note rate when offers carry different fees.
- Points
- An upfront fee equal to one percent of the amount borrowed, usually paid at closing to obtain a lower interest rate. Whether they pay off depends on how long the loan is kept.
- Term
- The length of the loan, expressed in years and converted to months for the payment math. A longer term lowers the monthly payment but adds months of interest, which can raise the total cost.
Good to know
Why total cost is the real yardstick
When two lenders quote you a price to borrow the same money, the headline interest rate is the first thing you see and the worst thing to judge by on its own. A rate is only a speed; what you actually pay depends on how long you carry the balance and how the payments are structured. This tool settles the question by reducing each offer to a single number you can compare directly: the total cost of credit, meaning every payment you will ever make on the loan added together. For an amortizing loan that is simply the monthly payment multiplied by the number of months in the term. The offer with the lower total is the one that takes less money out of your pocket over its life, full stop. That framing matters because lenders rarely compete on a single dimension. One will dangle a lower rate but stretch the term; another will quote a shorter term at a slightly higher rate. Comparing rates alone, or payments alone, lets the structure hide the true price. By collapsing both offers to total cost, you strip away the marketing and see which loan is genuinely cheaper. The rest of the decision, such as whether you can live with the monthly payment, comes after you know the real price, not before.
How amortization turns an offer into a payment
Each offer is priced the same way every standard installment loan is priced: amortization. The lender spreads the principal and all the interest into equal monthly payments so the balance reaches exactly zero at the end of the term. The payment is fixed by three inputs, the amount borrowed, the periodic interest rate, and the number of payments. The formula converts the annual rate into a monthly one, then solves for the level payment that pays off the balance over those months. Early in the schedule most of each payment is interest because interest is charged on the outstanding balance, which is largest at the start; later, more of each payment chips away at principal. You do not need to build the full schedule to compare offers, though, because the total cost is captured by the payment alone. Once amortization fixes the monthly figure, multiplying it by the months gives everything you will hand over. This is why the tool needs only a rate and a term for each offer. It computes the amortized payment for both, then totals each one across its own term. Two offers with different rates and different terms produce two different payments and two different totals, and the comparison falls out cleanly from there without any guesswork about which structure quietly costs more.
The case where a lower rate costs more
Here is the result that surprises most borrowers, shown with the tool's own defaults. Borrow 1,000,000. Loan A charges 7% over five years; Loan B charges 6% over seven years. Loan B has the lower rate, so instinct says it must be cheaper. It is not. Loan A's payment works out to about 19,801 a month, and over its 60 months that totals roughly 1,188,072. Loan B's payment is lower, about 14,609 a month, which feels easier, but you make 84 of them, so the total climbs to about 1,227,119. Loan A wins by roughly 39,047 even though its rate is a full point higher and its monthly payment is larger. The longer you borrow, the more months interest has to accumulate, and that extra time on the books outweighs the cheaper rate. A lower rate reduces the interest charged each period, but a longer term increases the number of periods, and here the second effect dominates. This is the central lesson of comparing offers: term and rate trade against each other, and only the total cost reveals the net result. A rate cut paired with a longer term can be a worse deal dressed up as a better one, and the only reliable way to know is to compute both totals and look at the gap.
Monthly payment versus total cost
The lower total cost is not automatically the right loan for everyone, and pretending otherwise misreads the comparison. Total cost answers one question, which offer is cheaper over its whole life, but the monthly payment answers a different and equally real question, which offer fits your cash flow now. In the default comparison, Loan A is cheaper overall yet demands about 19,801 a month, while Loan B's lighter 14,609 payment frees up roughly 5,192 every month. That breathing room has genuine value if your budget is tight, if your income is uneven, or if you would rather direct the difference toward higher-interest debt or an emergency cushion. The trade-off is honest: you pay more in total for the lower payment. What the tool does is make the price of that comfort explicit, so the choice is informed rather than accidental. Seeing that the easier payment costs an extra 39,047 over the term lets you decide whether the flexibility is worth it to you. Sometimes it clearly is; a cash-flow crunch that forces you into a missed payment or expensive short-term borrowing can cost far more than the interest difference. The point is not that the lower payment is wrong, but that you should choose it with both numbers in view. Compare the totals to know the price, then weigh the payment against your real monthly budget.
APR versus the note rate
The rate a lender advertises is the note rate, also called the nominal or stated rate, and it is the figure this tool uses to amortize each offer. It captures the interest charged on the balance but nothing else. The annual percentage rate, or APR, is a broader number designed to reflect the true cost of borrowing by folding certain required charges, such as origination fees and some closing costs, into a single annualized rate. Two loans can share the same note rate yet carry different APRs because one piles on more upfront cost. That is why comparing note rates alone can mislead you in the same way comparing payments alone can: a cheaper-looking rate may hide fees that make the loan more expensive than a rival quoting a higher rate with no fees. Because this comparison works purely from the note rate and term, it does not see fees. If the two offers you are weighing carry meaningfully different upfront costs, the honest move is to translate each into its APR first, then compare. APR puts both offers on a like-for-like footing by expressing everything you pay as one rate. Treat the note rate as the input to the payment, but treat APR as the fairer yardstick when fees enter the picture, and never assume the loan with the lower sticker rate is the cheaper one until you have accounted for what sits on top of it.
Points and upfront fees
Beyond the rate, many loans carry upfront costs that change the real comparison, and points are the clearest example. A point is a fee equal to one percent of the amount borrowed, paid at closing, usually in exchange for a lower interest rate. Buying points lowers your payment and your total interest, but only after you have covered the fee, so whether they pay off depends on how long you keep the loan. Origination fees, administrative charges and other closing costs work the same way: they are real money you spend to obtain the loan, and a rate-only comparison ignores them entirely. This matters because lenders can compete on the rate while quietly differing on fees, so two offers that look close on rate may be far apart once the upfront cost is added. The discipline is to compare the full cost of each offer, the total of all payments plus everything paid at closing, rather than the rate or even the payment in isolation. When fees differ between offers, fold them in before you decide; the cleanest route is to convert each offer to an APR, which expresses the rate and the required fees as one number. The headline rate tells you how interest accrues, but points and fees tell you what it costs to start the loan at all, and the cheaper offer is the one that wins on the combined figure, not on either piece alone.
Setting up a fair fight
A comparison is only meaningful if both offers are matched on everything except the terms you are testing. The most important control is the amount: this tool fixes a single principal and prices both offers against it, so you are never accidentally comparing a 1,000,000 loan to a 1,200,000 loan and mistaking a bigger balance for a worse rate. Hold the amount constant and you isolate the effect of rate and term, which is exactly what you want to judge. The terms themselves are allowed to differ, and that is the point, because real offers come with different lengths; the tool handles the mismatch by amortizing each over its own term and comparing the resulting totals rather than trying to force them onto the same timeline. What you should watch for is anything outside the model that breaks the match. Different fees, as covered above, are the usual culprit, and so is a different loan type with features the amortization does not capture, such as a variable rate or a balloon payment. If both offers are plain fixed-rate installment loans on the same amount, the comparison is clean and the total cost is decisive. If they differ in structure, normalize them first, by equalizing fees through APR or by adjusting for any non-standard features, so the number the tool produces reflects a genuine like-for-like contest rather than an apples-to-oranges one.
Reading the result the tool gives you
The headline output names the winner and the size of the win, for example that Loan A costs less by about 39,047, and shows the lower total cost figure alongside each offer's monthly payment. Read it as a layered answer rather than a single verdict. The winner line tells you which offer is cheaper over its whole life and by exactly how much, so you can see whether the gap is large enough to matter or small enough to be swamped by other considerations. The two payment figures tell you what each offer demands of your monthly budget, which is the cash-flow side of the decision. Seeing them together is the whole value of the comparison: a loan can win on total cost while losing on payment, as the default Loan A does, and only by looking at both numbers do you understand the real trade-off you are being offered. A small total-cost gap with a large payment difference often argues for the easier payment; a large gap with a small payment difference argues for the cheaper total. The tool deliberately does not decide for you, because the right answer depends on your budget and priorities, not on arithmetic alone. What it guarantees is that the price of each path is on the table, accurately computed, so the choice you make is the one you actually intended rather than the one the headline rate nudged you toward.
Common mistakes when comparing offers
The first and most expensive mistake is chasing the lowest monthly payment. A smaller payment almost always means a longer term, and a longer term usually means more total interest, so the offer that feels most affordable can quietly be the most expensive. The default comparison shows this directly: Loan B's lighter payment costs about 39,047 more over its life. The second mistake is judging by the headline rate alone, which ignores how term multiplies interest and how fees sit on top of the rate; a lower rate over a longer term, or a lower rate paired with heavy points, can lose to a higher-rate offer that finishes sooner or charges nothing upfront. The third is comparing offers on different amounts, which corrupts the whole exercise because a difference in balance masquerades as a difference in price. Always fix the same principal first. A fourth trap is ignoring fees entirely, treating two offers as equivalent on rate when one carries origination costs the other does not; fold those in through APR before deciding. The cure for all of these is the same discipline this tool enforces: hold the amount constant, compute the total cost of each offer, and look at both the total and the payment together. Let the total cost tell you which loan is genuinely cheaper, let the payment tell you which one your budget can carry, and make the decision with both facts in front of you rather than reacting to whichever number the lender chose to advertise.
Frequently asked questions
Why does the tool pick the loan with the higher monthly payment?
Because it judges by total cost, not by the payment. A higher payment usually means a shorter term, and a shorter term means fewer months of interest. The offer that costs less over its whole life wins, even when each individual payment is larger.
If I can only afford the lower payment, is the cheaper-total loan still right for me?
Not necessarily. Total cost tells you which offer is cheaper over its life, but the payment tells you which fits your budget. If the higher payment would strain your cash flow, the more affordable offer can be the wiser choice despite costing more in total. The tool shows both so you can weigh them.
Does this comparison include fees or points?
No. It works purely from the rate and term of each offer, so it does not see origination fees, points or closing costs. If your two offers carry meaningfully different upfront costs, convert each to an APR first and compare those for a fair match.
Both offers have to be the same amount, right?
Yes, and that is deliberate. The tool fixes a single principal and prices both offers against it, so a difference in balance can never masquerade as a difference in price. Only the rate and term are allowed to differ, which is exactly what you want to test.
Can two offers with different terms be compared fairly?
Yes. Each offer is amortized over its own term, and the tool compares the resulting total costs rather than forcing both onto the same timeline. The only thing to watch for is non-standard features the amortization does not capture, such as a variable rate or a balloon payment.
What does the difference figure mean?
It is the gap between the two total costs, the amount the cheaper offer saves you over the life of the loan. A small gap may be outweighed by a large payment difference; a large gap usually argues for the cheaper total. Read it alongside the two payments to judge the real trade-off.