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How It Works
This calculator compares two fixed-rate loans side by side using the standard amortization formula: M = P × r(1+r)n / [(1+r)n − 1]. Enter the loan amount, annual interest rate, and term for each loan to see which costs less over time.
The comparison shows monthly payments, total interest paid, total cost, and detailed amortization schedules with interactive charts so you can visualize exactly how each loan performs.
Example Problem
Compare a $20,000 loan at 6% for 5 years vs. a $20,000 loan at 19% for 5 years:
- Loan 1 monthly payment: $386.66
- Loan 2 monthly payment: $518.81
- Loan 1 total interest: $3,199.36
- Loan 2 total interest: $11,128.66
- Loan 1 saves $132.15/month and $7,929.30 total
Even with the same loan amount and term, the 13% rate difference nearly triples the total interest paid. Always compare the total cost, not just the monthly payment.
When to Compare Loans
Loan comparison is essential in several scenarios:
- Refinancing: Compare your current loan against a refinance offer to see if switching saves money after fees.
- Multiple offers: Banks and lenders may quote different rates and terms. A lower rate with a longer term may cost more overall.
- Shorter vs longer term: A 15-year mortgage has higher monthly payments but dramatically lower total interest vs. a 30-year term.
- Auto loans: Dealer financing vs. bank or credit union pre-approval often differ significantly.
Frequently Asked Questions
How do I compare two loans with different amounts?
Enter different loan amounts for Loan 1 and Loan 2. The calculator shows total interest and total paid for each, so you can see the true cost difference even when principal amounts differ.
Is a lower monthly payment always better?
Not necessarily. A lower monthly payment often means a longer term, which increases total interest. A $200,000 mortgage at 7% costs $279,017 in interest over 30 years but only $123,758 over 15 years, even though the 15-year payment is $598 higher per month.
What types of loans can I compare?
This calculator works for any fixed-rate loan: mortgages, auto loans, personal loans, student loans, and business loans. It does not support adjustable-rate mortgages (ARMs) or revolving credit lines.
How does interest rate affect total loan cost?
Interest compounds monthly. A seemingly small rate difference adds up dramatically over time. For a $300,000 mortgage over 30 years, the difference between 6% and 7% is about $71,000 in additional interest.
Does this calculator include fees and closing costs?
No. This calculator compares principal and interest only. For a complete comparison, add origination fees, closing costs, and other charges to the respective loan amounts before comparing.
Related Sites
- LoanChop.com — Mortgage and loan calculators with amortization schedules.
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Disclaimer: This calculator is for educational and informational purposes only. It does not constitute financial advice. Always consult a qualified financial professional before making loan decisions.