Loan Comparison: Compare Monthly Payments and Interest

A loan comparison calculator estimates the monthly payment and total interest for one fixed-rate loan using its amount, APR and term. Enter those figures to see the payment and interest implied by the standard repayment formula; to compare offers, run the calculation separately for each one using its quoted terms.

Formula

The calculator uses the fixed-payment amortizing-loan formula. First find the monthly interest rate, then calculate a level payment that covers interest and repays the principal over the stated number of months.

• r = monthly interest rate, calculated as APR ÷ 1,200 when APR is entered as a percentage.
• n = number of monthly payments, calculated as years × 12.
• p = amount borrowed, in dollars.
• pmt = monthly payment, in dollars, rounded to the nearest cent.
• int = estimated total interest, in dollars, calculated as rounded payment × number of payments − principal.

In symbols, pmt = round[p × r ÷ (1 − (1 + r)⁻ⁿ), 2]. Total interest is int = pmt × n − p. This total uses the rounded monthly payment, so it follows the calculator’s displayed payment rather than an unrounded theoretical amount.

Worked Example

Using the defaults—$20,000 borrowed, 8% APR and a five-year term:

1. Convert APR to a monthly rate: 8 ÷ 1,200 = 0.0066667, or about 0.66667% per month.
2. Convert the term to payments: 5 × 12 = 60 months.
3. Apply the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] = approximately $405.53 per month after cent rounding.
4. Calculate total paid using the displayed payment: $405.53 × 60 = $24,331.80.
5. Subtract the amount borrowed: $24,331.80 − $20,000 = $4,331.80 in estimated total interest.

The headline payment is $405.53 per month. The total-interest figure assumes all 60 payments are made as scheduled, with no extra payments or charges.

Assumptions

• The interest rate stays fixed for the full term.
• Payments are made monthly, at the end of each monthly period.
• Interest compounds monthly at APR divided by 12.
• The calculation excludes fees, taxes, insurance, PMI and escrow; none is included as an input.

How to Compare Loan Offers

This page calculates one set of terms at a time. For a comparison, enter each offer’s amount, APR and repayment term separately, and record the outputs alongside the lender’s disclosed payment and total cost. Keep the amount and term consistent if you want to isolate how the quoted APR affects the calculation. If the offers have different terms, note that both the payment and the time spent repaying change.

A lower monthly payment does not by itself mean a lower borrowing cost. A longer term can reduce the scheduled payment while increasing the number of months interest accrues. For example, a 60-month offer and a 72-month offer cannot be compared on payment alone: the second has 12 more scheduled payments, so compare total payments and the interest estimate as well.

Enter the APR and loan amount as quoted for the specific offer. If fees are financed into the balance, the amount used in the calculation may differ from the cash received. If a lender provides a payment that includes fees or other products, it may not match this calculator’s principal-and-interest result. Use the lender’s written disclosure to identify what its figures include.

What the Results Do—and Don’t—Show

The monthly payment is the formula’s scheduled principal-and-interest amount, not necessarily the complete bill. The total interest is an estimate derived from that payment and the number of periods. It does not include charges outside the three inputs, and it cannot account for a variable rate, payment holidays, irregular payment dates, or changing balances.

APR is entered as a percentage per year, not as a decimal monthly rate. For instance, enter 8 for 8% APR; do not enter 0.08. The calculator converts the percentage to a monthly rate internally. The term is entered in years, and the formula multiplies by 12 to get the number of payments. Mixing months and years can produce a result that is far from the offer being assessed.

Rounding also matters. Monthly payments are rounded to cents, and total interest is calculated from that rounded amount. A lender may use exact payment dates, different rounding conventions or additional amounts, so small differences are possible. A quoted APR may also reflect features or charges that this simplified formula does not separately model.

Common Comparison Mistakes

• Comparing different loan amounts: a larger balance generally produces a larger payment, obscuring the effect of the rate or term.
• Looking only at the payment: include the term and total expected payments in the comparison.
• Treating the estimate as a quote: the result is arithmetic based on your entries, not a lender offer or approval decision.
• Leaving out fees: this tool has no fee input. Check whether charges are paid separately or included in the amount financed.
• Assuming all loans are fixed-rate: this calculation holds APR constant; it does not project how a variable rate may change.

Frequently Asked Questions

How do I compare two loans with this calculator?
Run it once for each loan using the amount, APR and term quoted for that offer. Compare the monthly payment and estimated total interest, then check the lender’s disclosure for fees and other costs not modelled here.

Does a lower monthly payment mean a loan costs less?
No. A longer term can lower the scheduled payment while increasing total interest because repayment takes more months. Consider the term and total payments as well as the monthly amount.

Is the result the exact payment a lender will charge?
No. It is a fixed-rate estimate using monthly compounding and a rounded payment. Lender calculations can include fees, different timing or other terms not represented by the inputs.

Can I compare loans with different terms?
Yes, but note that the term itself affects both payment size and total interest. Enter each offer’s actual term, and compare the overall figures rather than treating payment alone as the deciding measure.

Does this calculator include fees or insurance?
No. It uses only loan amount, APR and years. Fees, taxes, insurance, PMI and escrow are excluded, so check the lender’s documents for any amounts that apply.

This result is an estimate; 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