How to use this loan comparison calculator
Enter the amount you want to borrow once, then fill in each offer. The fields sit side by side, Loan A on the left and Loan B on the right, so you can copy the numbers straight from two quotes.
- Loan amount (both loans): the amount you need. Both offers are compared on the same balance.
- Loan A rate and Loan B rate: the advertised yearly interest rates, before fees.
- Loan A term and Loan B term: how many years each loan runs. They do not need to match.
- Upfront fees: origination, application, establishment or broker fees for each loan, in dollars.
- More options: add any monthly account fee for each loan.
The headline tells you which loan is cheaper overall and by how much. Below it are each loan's repayment, total interest, total cost and effective APR. The chart tracks what each loan has cost you so far, year by year, and the side-by-side table lists every figure with the difference between them.
How the comparison works
Total cost = (M × n − P) + upfront fees + monthly fee × n M = monthly repayment · n = number of repayments · P = loan amount. M × n − P is the total interest.
Because you borrow the same amount from either lender, the principal cancels out. The only real difference between the two offers is what you pay on top of it: interest and fees. That is the number the headline compares.
Each loan's effective APR is the yearly rate that makes the cash you receive, after upfront fees, equal to the value of all your repayments and monthly fees. It folds the fees into one rate, the same idea as the APR in the US or the comparison rate in Australia.
Worked example
You need $25,000 and have two offers. Loan A is 7.5% over 5 years with no fees. Loan B is 6.9% over 7 years with a $400 upfront fee.
Loan A's repayment is $500.95 a month, with $5,057 of interest and an effective APR of 7.5%. Loan B's repayment is just $376.10, about $125 less, and its APR including the fee is 7.4%. On those two numbers Loan B looks better.
But Loan B runs for two extra years. Its interest comes to $6,592, plus the $400 fee, for a total cost of $6,992. Loan A is cheaper by $1,935. You pay less with Loan A at every point along the way, too: after one year it has cost you $1,730, against $2,035 for Loan B.
Why the lower repayment is often the dearer loan
Lenders and dealers often sell on the monthly repayment, because that is what people feel in their budget. There are two common ways a lower repayment ends up costing more:
- A longer term. Spreading the same balance over more months cuts each repayment, but every extra month adds interest. This is the most common trap, and it is what happens in the example above.
- Fees that outweigh a lower rate. A big upfront fee can wipe out the interest saved by a lower rate, especially on a smaller or shorter loan.
APR helps, but only when the terms match. Because it is a cost per year, a longer loan can show a lower APR while costing more in total. Use APR to compare offers over the same term, and the total cost to compare everything else.
When the cheaper loan depends on how long you keep it
Upfront fees make timing matter. Compare Loan A from the example with a different Loan B: 6% over the same 5 years, but with an $800 fee. Loan B's repayment is $483.32 and its total cost is $4,799, so it beats Loan A by $258 if you keep it for the full term. Repay early, though, and the picture flips. After one year Loan A has cost $1,730 and Loan B $2,180. After two years it is $3,127 against $3,287. Only in year three does Loan B pull ahead. If there is a real chance you will sell, refinance or pay the loan off within two years, Loan A is the better choice.
Tip: read the chart, not just the headline. If the two lines cross, the crossing point is where the loan with the higher upfront fee starts to win. If you are likely to repay before that point, take the other loan.
What else to compare besides cost
- Early repayment rules: some loans charge a prepayment penalty or break fee, which can cancel out a lower rate if you repay early.
- Extra repayments: a loan that lets you pay extra for free can end up cheaper than one with a slightly lower rate that does not.
- Fixed or variable: a variable rate can rise. Rerun the comparison with that rate 2 percentage points higher to see the risk.
- Secured or unsecured: a secured loan, such as a car loan, is often cheaper, but the lender can take the asset if you fall behind.
Go deeper on a single offer
To see one offer in detail with a payment-by-payment schedule, use the loan calculator. For an offer with an origination fee taken from the payout, the personal loan calculator shows exactly how much you receive. Comparing dealer finance with a bank loan? The car loan calculator includes trade-ins, sales tax and balloons. And if you are weighing up switching your home loan, the refinance calculator works out your break-even point.
Frequently asked questions
Should I just pick the loan with the lowest interest rate?
Is the loan with the lower APR always cheaper?
How does the calculator treat upfront fees?
Why does one line on the chart start above zero?
Can I use this to decide whether to refinance my mortgage?
What if both loans cost about the same?
This calculator gives estimates for education and planning. It is not financial advice, and your lender's figures may differ. See how we calculate.