Interest Rate Loan Comparison Calculator

This loan comparison calculator estimates the monthly payment and total interest for a fixed-rate loan using its amount, APR, and term. Enter the figures from a lender’s offer to see the calculated cost; this one-loan estimate does not rank or recommend offers.

Formula

The calculator uses the standard fixed-payment amortization formula. It first finds a monthly payment, rounds that payment to the nearest cent, then multiplies the rounded payment by the number of months to estimate total payments and subtracts the principal to estimate interest.

• Monthly payment: M = round[P × r / (1 − (1 + r)⁻ⁿ), 2]
• Total interest: I = M × n − P
• Monthly rate: r = APR / 1,200
• Number of payments: n = years × 12

P is the amount borrowed in dollars; APR is the annual percentage rate entered as a percentage; r is the monthly rate as a decimal; n is the number of monthly payments; M is the rounded monthly payment in dollars; and I is estimated total interest in dollars. For example, an APR of 8 means 8%, not 0.08. The factor 1,200 converts a percentage per year into a decimal rate per month.

Worked Example

Using the calculator’s default inputs—$20,000 principal, 8% APR, and a 5-year term:

1. Convert the APR to a monthly decimal rate: r = 8 / 1,200 = 0.0066667.
2. Convert the term to payments: n = 5 × 12 = 60.
3. Apply the payment formula: M = round[20,000 × 0.0066667 / (1 − (1.0066667)⁻⁶⁰), 2] = $405.53 per month.
4. Use the rounded payment in the total: I = $405.53 × 60 − $20,000 = $4,331.80 total interest.

The estimated total of principal and interest is $24,331.80. Because the payment is rounded to cents before calculating the total, the displayed interest follows the calculator’s stated method.

Assumptions

• The interest rate stays fixed throughout the term.
• There are equal monthly payments, with the first payment due one month after the loan starts.
• Interest is modelled monthly at APR divided by 12; the calculation does not reproduce every lender’s day-count or rounding method.
• Fees, taxes, insurance, optional products, and other charges are not included. APR treatment and disclosed total costs can depend on the loan offer.

How to Compare Loan Interest

To compare two offers, calculate each separately using the same amount borrowed and the term you are actually considering. Enter each offer’s disclosed APR rather than relying only on a stated interest rate. APR is intended to express the annual cost of borrowing in percentage terms and may reflect certain charges, but the exact disclosure and included costs depend on the offer. Check the lender’s documents to understand what the quoted APR represents.

A lower payment by itself does not establish that a loan has lower overall cost. A longer term usually spreads repayment across more months, which can reduce the monthly payment while increasing the total interest under otherwise identical fixed-rate assumptions. A shorter term can produce a higher payment but fewer interest-charging months. Compare both monthly payment and total cost, and keep fees and other terms visible rather than treating this estimate as a complete offer comparison.

For a true side-by-side comparison, record the amount financed, APR, term, payment frequency, fees, and whether the rate is fixed or variable for each offer. If one loan includes a fee financed into the balance, the amount borrowed for the calculation may differ from the cash you receive. Variable rates, irregular payment schedules, introductory rates, and balloon payments do not follow this calculator’s simple fixed-payment model.

Understanding the Result and Its Limits

The monthly payment shown covers principal and interest only. Early in a typical amortizing loan, a larger portion of each payment goes toward interest; over time, the interest portion generally falls as the outstanding principal is repaid. The total-interest figure is the estimated interest over the full stated term assuming all scheduled payments are made as modelled.

This is an estimate, not a lender’s payoff quote or an exact payment schedule. Small differences can result from payment dates, daily interest calculations, rounding at each installment, fees, or a rate that changes. The displayed total also does not account for extra payments, late payments, skipped payments, or early payoff. To model those circumstances, use a calculator designed for amortization, extra payments, or payoff timing and use the lender’s actual loan terms.

Do not confuse the note interest rate with APR. The interest rate is the rate used to calculate interest on the balance, while APR is a disclosure intended to represent a broader annual borrowing cost. They can differ when certain costs apply. Ask the lender for the precise figures and fee details rather than assuming every charge is included in the calculator.

Common Comparison Mistakes

• Entering the wrong rate format: Enter 8 for 8% APR, not 0.08; the calculator handles the percentage conversion.
• Comparing different loan amounts: Keep the principal the same when isolating the effect of APR and term.
• Looking only at the payment: Check the number of payments and total interest as well as the monthly amount.
• Ignoring fees or rate conditions: The calculator cannot infer charges, discounts, variable-rate changes, or lender-specific terms.
• Assuming rounded figures are exact: A lender’s payment schedule can differ by a small amount because of its calculation and rounding practices.

Frequently Asked Questions

How do I compare interest rates on loans?
Use the same principal and term, enter each offer’s APR, and compare the calculated payment and total interest. Review fees and terms separately because this calculator does not include them.

Is APR the same as the interest rate?
No. The interest rate applies to the loan balance. APR is a broader annual cost disclosure that may include certain charges, so consult the lender’s documents for what is included.

Does a lower monthly payment mean less interest?
Not necessarily. A longer repayment term can lower the scheduled monthly payment while increasing total interest, because repayment extends over more months.

Does this calculator include loan fees?
No. It models principal and interest only. Check the offer disclosure for fees and other costs, and consider how any financed fee changes the amount borrowed.

Can I compare a variable-rate loan with this calculator?
Only as a simplified snapshot using one assumed APR. A variable rate can change, so this fixed-rate calculation cannot predict later payments or total interest.

This result is an estimate for educational use; the lender’s disclosure gives the exact figures.

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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 | $ | round(p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)), 2) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2