Interest Loan Comparison Calculator: Compare Payments

This interest loan comparison calculator estimates the monthly payment and total interest for one fixed-rate, fully amortizing loan using its principal, APR, and term. Enter the loan figures to see the calculated amounts; use the same method for each offer you want to compare, while checking each lender’s disclosed fees and terms separately.

Formula

The calculator treats the APR as a fixed annual rate divided into monthly periods, and assumes equal payments made monthly. It first calculates the monthly payment, then subtracts the original amount borrowed from all scheduled payments to estimate total interest.

• Monthly rate: r = APR / 1,200, where APR is entered as a percentage per year and r is a decimal rate per month.
• Number of payments: n = years × 12, with years entered in years and n expressed in monthly payments.
• Monthly payment: M = P × r / [1 − (1 + r)⁻ⁿ], where P is the loan amount in dollars and M is dollars per month.
• Total interest: I = M × n − P, where I and P are dollars.

The payment formula spreads repayment of principal and interest across the stated term. The interest output uses the payment rounded to cents, matching the displayed monthly amount. A real loan’s final payment can differ because of lender rounding, payment dates, fees, or contract terms.

Worked Example

Using the calculator’s defaults: P = $20,000, APR = 8%, and a five-year term.

1. Convert the annual percentage to a monthly decimal: r = 8 / 1,200 = 0.0066667.
2. Find the number of monthly payments: n = 5 × 12 = 60.
3. Apply the payment formula: M = 20,000 × 0.0066667 / [1 − (1 + 0.0066667)⁻⁶⁰] ≈ $405.53 per month, rounded to cents.
4. Use the displayed payment to estimate interest: I = $405.53 × 60 − $20,000 = $4,331.80.

These are estimates under the stated assumptions; the monthly installment and total interest are separate ways to describe the same repayment schedule.

Assumptions

• The interest rate stays fixed throughout the term.
• Payments are made monthly at the end of each period.
• Interest accrues monthly using APR divided by 12.
• Fees, taxes, insurance, PMI, escrow, late charges, and optional add-ons are not included.

How to Compare Loan Offers

For a meaningful interest loan comparison, use consistent inputs and compare the same borrowing amount and repayment period. If one offer has a different term, its payment and total interest cannot be compared as if the terms were identical: a longer term generally means more scheduled payment periods, while a shorter term concentrates repayment into fewer, usually larger payments. The calculator shows the arithmetic effect of the values entered; it does not determine which offer fits a person’s circumstances.

When reviewing an actual offer, verify the details that may not be captured by this simplified calculation:

• Whether the quoted rate is fixed or can change, and whether it is stated as an APR or another rate measure.
• The exact amount financed, payment count, payment frequency, and due dates.
• Any required charges or optional products, and whether costs are paid upfront or included in the amount borrowed.
• Whether extra payments are permitted and how they are applied; this calculator does not model extra payments.
• The lender’s payment schedule and disclosed total cost, which may reflect rounding or contract-specific details.

For a comparison involving different fees or cash received, first establish what amount is actually borrowed and what costs are included. Do not simply subtract a fee from the interest result: an upfront charge and interest are different cost components, and the loan documents may treat them differently. Obtain the actual figures from the lender rather than assuming a rate, fee, or approval condition.

Reading the Results and Common Mistakes

The monthly payment is the scheduled amount under this model, not a full household budget or a statement of eligibility. Total interest is the amount above the original principal paid over the calculated schedule. It is not the total amount paid: principal plus interest equals the scheduled payments here, before excluded costs.

Common errors include entering 8 instead of 0.08 when the rate field asks for a percentage, entering a monthly rate as though it were an annual APR, or entering months into the years field. Enter 8 for an 8% APR and enter 5 for five years. The formula converts the percentage and term internally. Also, cents are rounded for each displayed payment; multiplying a rounded payment by the number of payments can produce a small difference from a lender’s schedule if the lender handles rounding differently.

A longer term can reduce the calculated monthly payment while increasing total interest, because the balance remains outstanding across more periods. That observation is a mathematical comparison, not a recommendation. The result also does not include how a variable rate might change over time, payment holidays, missed payments, or changes to the balance.

Limits and Other Cost Measures

This calculator compares the core amortizing-loan arithmetic, not every feature of a borrowing agreement. It assumes a single disbursement, a fixed rate, level monthly payments, and no extra repayments. It is not designed for interest-only loans, revolving credit, irregular payment schedules, balloon payments, or loans with changing rates. For those products, the payment pattern and interest calculation may require additional contract information.

APR and interest cost are related but not interchangeable in every context. APR is an annualized rate measure, while the interest output here is a dollar estimate based on the entered APR and simplified monthly schedule. Costs such as lender charges may be treated differently in disclosures and are not separately entered here. Compare the formal disclosures on the same basis and ask the lender to clarify any line item that is not represented by the calculator.

Use the calculator as a way to understand how principal, rate, and term affect an estimated schedule, not as a prediction of final paperwork. The result is an estimate, and the lender’s disclosure gives the exact figures.

Frequently Asked Questions

How do I compare interest on two loans?
Calculate each using its actual principal, APR, and term, then compare monthly payment and total interest alongside fees, repayment rules, and other disclosed terms. Keep the assumptions consistent where possible.

Does a lower monthly payment mean less interest?
Not necessarily. A lower payment may result from a longer repayment term, which can mean more payments and more total interest. Compare the total schedule as well as the monthly amount.

Is total interest the same as total repayment?
No. Total interest is the estimated amount paid above principal. In this calculator, total scheduled repayment is the rounded monthly payment multiplied by the number of payments; it includes both principal and interest.

Does this calculator include loan fees?
No. Fees, taxes, insurance, and other charges are excluded. Check the lender’s disclosure for costs that apply to the particular offer.

Can I compare loans with different terms?
Yes, but note that the term itself changes the payment count and interest estimate. Report the term next to each result so a payment difference is not mistaken for a rate difference.

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in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2