Loan Comparison Tool: Compare Payments and Interest

A loan comparison tool helps you compare estimated payments and total interest for a fixed-rate loan using its amount, APR and term. Enter those figures to calculate the monthly payment and interest over the full term; this calculator models one loan at a time, so compare options by running it again with each set of terms.

Formula

The calculator uses the standard amortizing-loan payment formula. It converts the annual percentage rate to a monthly rate, then calculates the fixed payment that pays the balance down to zero over the stated number of monthly payments.

• P is the loan amount in dollars.
• APR is the annual percentage rate, entered as a percentage number.
• r is the monthly rate, calculated as APR ÷ 1,200.
• n is the number of monthly payments, calculated as years × 12.
• Payment is P × r ÷ [1 − (1 + r)⁻ⁿ], rounded to the nearest cent.
• Total interest is the rounded monthly payment × n − P.

For the calculator’s default values, P = $20,000, APR = 8%, and the term is five years. Thus r = 0.08 ÷ 12 = 0.0066667 and n = 5 × 12 = 60. The unrounded payment is approximately $405.527, so the monthly payment displayed is $405.53. Total interest uses that rounded payment: $405.53 × 60 − $20,000 = $4,331.80.

Worked Example

Suppose you want to compare this example with another loan offer. Enter the same principal, APR and term shown above, then follow the calculation:

1. Convert 8% APR to a monthly decimal rate: 8 ÷ 1,200 = 0.0066667.
2. Convert five years to payment periods: 5 × 12 = 60 months.
3. Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] ≈ $405.527.
4. Round the monthly payment to cents: $405.53.
5. Multiply the rounded payment by 60 and subtract the principal: $405.53 × 60 − $20,000 = $4,331.80 in estimated total interest.

Assumptions

• The interest rate stays fixed for the full term.
• Payments are equal, made monthly, and occur at the end of each monthly period.
• Interest is modelled monthly at APR ÷ 12.
• The calculation excludes fees, taxes, insurance, private mortgage insurance, escrow and other charges because they are not inputs.
• The displayed payment is rounded to cents, and total interest uses that rounded payment.

How to Compare Loan Offers

Run the calculator separately for each offer, entering the principal you would actually borrow, the stated APR and the repayment term. Keep the assumptions consistent: a payment estimate for a different loan amount or term is not a like-for-like comparison. APR and interest rate can be presented differently in loan documents, so confirm which figure the calculator is intended to use and check the lender’s disclosure for the complete cost information.

For example, a longer term can reduce the calculated monthly payment while increasing the number of payments. That may result in more interest over the life of the loan, even if the APR is unchanged. A shorter term generally means fewer payment periods, but the payment calculation alone does not account for anyone’s budget, eligibility or circumstances. Use the outputs as arithmetic estimates, not as a decision about borrowing.

• Compare the same borrowed amount where possible.
• Use each offer’s own APR and term rather than substituting an advertised figure.
• Look at both the monthly payment and estimated total interest.
• Check whether fees or other costs change the amount financed or appear separately.
• Verify payment dates, rate type and any variable-rate terms in the actual loan documents; this model assumes a fixed rate.

When the Estimate Can Differ

This formula describes a conventional fixed-rate, fully amortizing loan with regular monthly payments. Actual schedules may differ if payments are made on another frequency, the first payment is due on an unusual date, the rate changes, or payments are irregular. A lender may also use a different day-count or rounding method. The calculator does not reproduce a lender’s full amortization schedule or determine a payoff amount on a particular date.

APR is a useful comparison input, but the calculator does not add fees to the principal or separately model fees. If an offer includes charges, promotional terms or other payment features, the two outputs here will not capture all of them. Obtain the actual figures and terms from the lender rather than inferring them from this estimate.

Common Mistakes and Limits

• Entering 8 instead of 0.08: The APR field expects 8 for an 8% annual rate; the formula converts it to a monthly decimal.
• Entering months as years: The term field is in years. A five-year term is 5, not 60.
• Comparing different principals: A smaller calculated payment may simply reflect a smaller amount borrowed.
• Ignoring total interest: A monthly payment does not show the full cost over the repayment period.
• Treating estimates as lender quotes: Fees, payment schedules and contract terms can change the actual amounts.

The tool cannot indicate approval, affordability or whether an offer suits a particular person. It also does not calculate taxes, insurance, escrow, late charges, early repayment effects or variable-rate changes. For a fuller comparison, review the lender’s written disclosures and payment schedule alongside these estimates.

Frequently Asked Questions

What does a loan comparison tool calculate?
Here, it calculates a fixed monthly payment and estimated total interest from the loan amount, APR and term. It does not assess eligibility or include costs that are not entered.

How do I compare two loan offers?
Run the calculator for each offer with its amount, APR and term. Compare the resulting payment and interest, then check the lender disclosures for fees, payment timing and terms the formula does not model.

Does a lower monthly payment mean a loan costs less?
Not necessarily. A longer term can lower the scheduled payment by spreading repayment across more months, while increasing total interest. Compare both outputs and the full written terms.

Does this calculator include fees?
No. Fees and other charges are not included as inputs, so the results are not an all-in cost figure. Check the lender’s disclosure for charges and the amount actually financed.

Can I use it for a variable-rate loan?
It can show an estimate using one APR held constant, but it does not forecast rate changes. If the rate changes, the payment or total interest may differ from this calculation.

This result is an estimate, and the lender’s disclosure gives the exact figures.

Related

• Debt Consolidation Loan Comparison Calculator
• 15-Year Loan Payment Calculator and Comparison
• Equity Loan Rates: Compare Costs and Payments

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