Loan Comparison Calculator: Which Loan Offer Really Costs Less?

Which Loan Offer Is Cheapest?

Here is $20,000 quoted by three lenders. The cheapest is not the one with the lowest payment, and not quite the one with the lowest APR either:

Offer A wins on total cost, saving $353.71 against B and $2,288.66 against C, even though it charges a fee and does not have the lowest APR.

APR vs Interest Rate: Why the Lowest Rate Can Still Lose

The interest rate prices the money you borrow. The APR adds the fees and states the result as a yearly rate, so offers with different fees can be compared like for like.

Offer A shows how a fee changes the picture. Its rate is 9.9%, but the $600 fee is deducted, so you receive $19,400 while repaying a $20,000 loan. Measured on the cash you actually get, the loan costs 11.22% a year: higher than its rate, still lower than Offer B's 11.50%.

APR stops working as a tiebreaker when terms differ. Offer C has the lowest APR, 10.50%, but over seven years instead of five, so it charges interest for two extra years and ends up the most expensive. Compare APRs for the same term, and total cost for everything else.

Paying a Fee for a Lower Rate: How Long Until It Pays Off?

A fee is paid on day one; the rate saving builds month by month. If you might repay early, after a bonus, a sale or a refinance, what matters is the cost at the point you repay. With no early repayment charge, A against B:

Break-even is month 26. Repay before then and the no-fee loan was the better deal. Against Offer C the break-even is month 29. The chart under the calculator draws these lines for your own offers.

Lower Monthly Payment or Lower Total Cost?

Offer C's payment is $86.75 a month lower than A's, which can matter if your budget is tight. Over the life of the loan that relief costs $2,288.66 more. One middle path is to take the shorter loan and treat the difference as the price of finishing two years sooner, or to take the longer loan and overpay when you can; the loan repayment calculator shows what overpaying saves, provided the lender allows it without a charge.

Fee Deducted or Added to the Loan?

Adding the fee to the loan gets you the full $20,000 but you pay interest on the fee for five years, so the total cost rises by $163.07. Choose Upfront fees are in each offer to switch between the two.

What Every Loan Quote Should Tell You

• The official disclosure. US lenders give a Truth in Lending disclosure with the APR and finance charge. EU lenders give the Standard European Consumer Credit Information with the APRC. Indian lenders must give a Key Facts Statement with the APR and a repayment schedule before you sign. Check your results against these figures.
• Every fee. Origination, arrangement, broker and monthly account fees, and any insurance the lender requires.
• Early repayment terms. If you may repay early, a loan without a prepayment charge can be worth a slightly higher rate, and the break-even month above tells you how long you would need to keep a fee loan.
• Fixed or variable. A variable rate can rise after you sign. Compare at today's rate, then test a rise with the EMI calculator.

How the Calculator Compares Offers

• Payment: P × r × (1 + r)^n ÷ ((1 + r)^n − 1), with r = annual rate ÷ 12 ÷ 100 and n = months.
• Total cost: total interest + upfront fees + monthly fees × n.
• APR including fees: the monthly rate i at which the cash you receive equals the present value of all payments and monthly fees, × 12. The effective annual rate is (1 + i)^12 − 1.
• Cost if repaid early: payments and fees made so far + balance still owed − cash received.

Lenders' official APRs can differ slightly because of the first payment date or costs this calculator does not know about, such as required insurance.