Loan APR Comparison: Compare Payments and Interest

This loan APR comparison calculator estimates the monthly payment and total interest for a fixed-rate loan using its amount, APR, and term. Enter the figures shown in a lender’s offer to see the payment and interest estimate; compare offers by calculating each one separately with its own disclosed figures.

Formula

The calculator uses the standard fixed-payment amortization formula. First it calculates the monthly payment, then estimates total interest as the sum of the rounded monthly payments minus the original principal.

• P is the amount borrowed, in dollars.
• APR is the annual percentage rate entered as a percentage, such as 8 for 8% per year. The formula converts it to a monthly rate, r = APR / 1200.
• Y is the loan term in years, and n = 12 × Y is the number of monthly payments.
• M is the monthly payment in dollars: M = P × r / [1 − (1 + r)⁻ⁿ]. The displayed payment is rounded to cents.
• I is estimated total interest in dollars: I = M × n − P. Since M is rounded to cents, the total uses that rounded payment.

APR is a standardized rate measure intended to reflect borrowing costs, but the precise items included in a lender’s APR calculation can depend on the product and applicable disclosure method. This calculator does not reconstruct a lender’s APR from fees or determine which fees are included. Enter the APR stated in the offer rather than substituting a separate nominal interest rate.

Worked Example

Using the defaults—$20,000 borrowed, 8% APR, and a five-year term—the calculation has 60 monthly payments and a monthly rate of 8 ÷ 1200 = 0.0066667.

1. Monthly payment before rounding: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] ≈ $405.53.
2. Monthly payment rounded to cents: $405.53.
3. Total of the 60 rounded payments: $405.53 × 60 = $24,331.80.
4. Estimated total interest: $24,331.80 − $20,000 = $4,331.80.

How to Compare Loan APRs

For a like-for-like comparison, use the same borrowing amount and repayment period for each offer when those terms are available. Enter each offer’s own APR and term, then compare the displayed payment and interest. A longer term can lower the monthly payment while increasing the number of payments, so a smaller payment alone does not establish that an offer has a lower overall borrowing cost.

If offers have different loan amounts or terms, the results are not an apples-to-apples comparison. You can still use the estimates to understand the cash-flow difference, but note which input changed. Also compare the lender’s written disclosures: this calculator omits fees and does not calculate an all-in cost from an offer.

• Check that each APR is entered as a percent: enter 8 for 8%, not 0.08.
• Use the loan amount actually financed, not an assumed purchase price or amount before a down payment.
• Convert the term consistently; this calculator accepts years and assumes 12 payments per year.
• Record any fees, payment conditions, or rate changes shown in the offer, because they are not added to these outputs.

What APR Does—and Does Not—Show

APR helps put the borrowing rate into an annualized format and can be more informative than looking at an interest rate alone when the APR reflects certain borrowing costs. Still, an APR is not a promise that every borrower will pay the same total amount, and it does not by itself describe every feature of a loan. The amount borrowed, payment schedule, fees, and whether the rate can change all matter to the actual cost.

A common misconception is that comparing APRs always gives a complete cost comparison. This calculator assumes a fixed APR and regular monthly payments. It does not model an adjustable rate, irregular payment dates, an introductory rate, a balloon payment, or fees paid separately or added to the balance. Read the offer’s payment schedule and fee disclosures alongside the estimate.

Limits and Common Calculation Issues

The formula assumes equal payments made monthly and a monthly rate equal to APR divided by 12. Real contracts can use different timing or calculation details, and the lender’s schedule controls the amounts due. Rounding also matters: this estimate rounds the monthly payment to cents and multiplies that rounded figure by the number of payments. A lender may handle the final payment or rounding differently, so the calculator’s total is not an exact payoff quote.

Do not treat total interest as the same thing as total loan cost. The output subtracts principal from the estimated sum of scheduled payments; it excludes fees, taxes, insurance, and other expenses. It also does not calculate early payoff savings or the effect of extra payments. For comparisons, use figures from the same stage of the offer and verify whether the quoted APR and payment include the same items.

Assumptions

• The interest rate is fixed for the full term.
• Payments are equal, made monthly, and treated as occurring at regular intervals.
• Interest is modelled monthly at APR / 12.
• Fees, taxes, insurance, PMI, escrow, and other charges are not included.

Frequently Asked Questions

Is APR the same as the interest rate?
Not necessarily. APR is an annualized borrowing-cost measure and may include certain costs beyond the stated interest rate. Use the APR disclosed for the specific offer, and check its disclosure for what is included.

How do I compare APRs when loan terms differ?
First compare offers using the same amount and term if possible. If the terms differ, calculate each offer as written and keep the term difference in view: the payment and total interest reflect both APR and repayment length.

Does a lower monthly payment mean a cheaper loan?
No. A longer term may reduce the monthly payment but increase the number of payments and total interest. Compare the term and total estimated interest as well as the payment.

Does this calculator include loan fees?
No. It uses the APR you enter but does not add fees to the balance or calculate an APR from an itemized fee list. Check the lender’s disclosures for fees and the precise payment schedule.

Why might my lender’s payment differ?
The lender may use different rounding, payment dates, fees, rate details, or contract-specific calculations. This estimate assumes a fixed rate and regular monthly payments; the lender’s disclosure gives the exact figures.

This result is an estimate, and 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 | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2