Compare Two Loans Calculator

Loan 1
Loan 2

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Worked Examples

Lower Interest Rate

Compare two 5-year auto loans at 6% and 19%

This classic comparison shows how much a higher interest rate changes both the payment and the full repayment cost.

  1. Set both loans to $20,000 for 5 years.
  2. Use 6% for Loan 1 and 19% for Loan 2.
  3. The lower-rate loan produces the lower monthly payment.
  4. It also dramatically reduces total interest paid over the term.
  5. This is why comparing total cost matters just as much as comparing the monthly payment.

This kind of side-by-side comparison is common when checking dealer financing against a bank or credit-union preapproval.

Term Tradeoff

Compare a 15-year mortgage to a 30-year mortgage

A shorter term usually raises the monthly payment but cuts the total interest significantly.

  1. Enter the same $300,000 principal in both loans.
  2. Use 6.25% for the 15-year loan and 6.75% for the 30-year loan.
  3. The 15-year loan has the higher monthly payment.
  4. But it pays off much faster and carries much less total interest.
  5. This is the key tradeoff between affordability now and total borrowing cost later.

This example is helpful when comparing refinance offers with different terms instead of different loan amounts.

Refinance Scenario

Compare keeping a larger balance vs refinancing to a lower rate

Loan comparisons are often about whether the cheaper rate offsets a balance or term change.

  1. Set Loan 1 to $240,000 at 7.1% for 25 years.
  2. Set Loan 2 to $245,000 at 5.9% for 25 years to represent rolling fees into the refinance.
  3. The refinance loan starts slightly larger because of costs.
  4. But the lower rate can still reduce the monthly payment and total interest.
  5. This helps you see whether the lower rate compensates for the new principal.

For a real refinance decision, you would also compare closing costs, taxes, and how long you plan to keep the loan.

Loan Amortization Formula

The standard amortization formula finds the fixed monthly payment for a loan using the principal P, monthly interest rate r, and total number of payments n. Every comparison in this calculator starts from that same payment formula.

M = P × r(1+r)^n / [(1+r)^n − 1]

How It Works

This calculator compares two fixed-rate loans side by side so you can judge them on more than just the monthly payment. After you enter the amount, interest rate, and term for each loan, it calculates the payment schedule, total interest, and total cost for both options. The charts help you see how balance, interest, and payment burden evolve over time, while the amortization tables show the month-by-month breakdown. That makes it useful for mortgages, auto loans, personal loans, and refinance offers where a lower payment can sometimes hide a higher overall borrowing cost.

Example Problem

Compare a $20,000 loan at 6% for 5 years against a $20,000 loan at 19% for 5 years.

  1. Keep the principal and term the same so the comparison isolates the effect of interest rate.
  2. Calculate the monthly payment for Loan 1 at 6% and Loan 2 at 19%.
  3. Loan 1 has the lower monthly payment because its financing rate is lower.
  4. Build the amortization schedules to total the interest paid over all 60 months.
  5. Loan 2 pays dramatically more interest even though the amount borrowed is the same.
  6. Use the monthly-payment difference and total-cost difference together to decide which loan is more affordable and which is cheaper overall.

This is the key lesson of loan comparison: the payment matters, but the total cost over the full term matters just as much.

Key Concepts

The monthly payment is only one dimension of a loan. A longer term can reduce the payment but increase the total interest. A lower rate can offset a slightly larger principal in a refinance, while a shorter term can increase the payment but cut borrowing costs sharply. When comparing two loans, it helps to separate three questions: which one has the lower monthly payment, which one has the lower total interest, and which one leaves you in debt for less time.

Applications

  • Comparing two auto-loan offers from different lenders
  • Deciding between a 15-year and 30-year mortgage
  • Evaluating whether a refinance actually saves money after rate and balance changes
  • Comparing a shorter higher-payment term against a longer lower-payment term
  • Checking how much a higher rate increases the total cost of borrowing
  • Understanding amortization before accepting dealer or bank financing

Common Mistakes

  • Choosing the loan with the lower monthly payment without checking total interest paid
  • Ignoring fees or closing costs that may increase the true cost of one option
  • Comparing loans with different terms without noticing how much longer one keeps you in debt
  • Focusing only on interest rate while missing changes in loan amount or rolled-in costs
  • Assuming a refinance always saves money without considering how long you will keep the loan
  • Treating fixed-rate comparisons as valid for adjustable-rate loans or other variable products

Frequently Asked Questions

How do I compare two loans with different amounts?

Enter the actual amount, rate, and term for each loan. The calculator compares monthly payment, total interest, and total paid side by side so you can see the true cost difference even when principal amounts are not equal.

Is a lower monthly payment always better?

No. A lower monthly payment often comes from a longer term, and that can increase total interest substantially. The better loan depends on both affordability now and total cost over time.

What types of loans can I compare?

This calculator is best for fixed-rate loans such as mortgages, auto loans, personal loans, and some refinance offers. It is not designed for adjustable-rate products or credit cards with changing balances.

How does interest rate affect total loan cost?

Even a modest rate change can add thousands of dollars in total interest over a long term. The longer the loan, the more strongly the rate difference compounds into total cost.

Does this calculator include fees and closing costs?

No. It compares principal and interest only. To model fees, you can add them to the loan amount manually or treat them as part of a refinance balance increase.

Is a shorter loan term always cheaper?

Usually yes in total dollars paid, because you spend less time accruing interest. But the shorter term also raises the monthly payment, so the better choice depends on cash flow as well as total cost.

How should I compare refinance offers?

Compare the new rate, new balance, and remaining term together. A refinance with a lower rate can still cost more overall if fees are large or if the new term restarts the loan for many more years.

Why look at the amortization schedule?

The amortization schedule shows how much of each payment goes to interest versus principal over time. It helps explain why two loans with similar payments can have very different long-term costs.

Reference: For educational comparison only. Principal, interest rate, and term are modeled as fixed-rate amortizing loans and do not include taxes, insurance, fees, or financial advice.

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