Loan Estimate Comparison Table

Loan Comparison Formula:

\[ Total\ Cost = (P \times \frac{r(1+r)^n}{(1+r)^n-1} \times n) + fees \]

Loan 1

Principal Amount (P):

Interest Rate (r):

decimal

Number of Periods (n):

Additional Fees:

Loan 2

Principal Amount (P):

Interest Rate (r):

decimal

Number of Periods (n):

Additional Fees:

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1. What is a Loan Estimate Comparison?

A loan estimate comparison helps you evaluate different loan options by calculating the total cost of each loan, including principal, interest, and fees. This allows you to make an informed decision about which loan is more economical in the long run.

2. How the Calculator Works

The calculator uses the standard loan payment formula:

\[ Monthly\ Payment = P \times \frac{r(1+r)^n}{(1+r)^n-1} \]

Where:

\( P \) — Principal loan amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of payments (loan term in months)

Total Cost Calculation: The calculator multiplies the monthly payment by the number of payments and adds any additional fees to determine the total cost of each loan.

3. Understanding the Results

Monthly Payment: The amount you would pay each month for each loan option.
Total Cost: The sum of all payments plus any additional fees over the life of the loan.
Difference: Shows which loan is more expensive overall and by how much.

4. Using the Calculator

Tips: Enter the principal amount, interest rate (as a decimal), loan term in months, and any additional fees for each loan you want to compare. The calculator will show you a side-by-side comparison of the monthly payments and total costs.

5. Frequently Asked Questions (FAQ)

Q1: Should I always choose the loan with the lowest total cost?
A: Not necessarily. Consider other factors like payment flexibility, prepayment penalties, and your ability to make the monthly payments.

Q2: How do I convert annual interest rate to monthly?
A: Divide the annual rate by 12 (months) and convert from percentage to decimal (e.g., 6% annual = 0.06/12 = 0.005 monthly).

Q3: Why are fees included separately?
A: Some loans have origination fees or other charges that aren't reflected in the interest rate but affect the total cost.

Q4: Can I compare more than two loans?
A: This calculator compares two loans at a time. For more loans, you can perform multiple comparisons.

Q5: Does this work for all types of loans?
A: This works for standard amortizing loans (like mortgages and car loans). It doesn't work for credit cards or interest-only loans.