Two loan offers can look similar and cost very different amounts — or look different and cost the same. This calculator puts two loans side by side and compares them on the only basis that settles the argument: total cost, meaning every payment plus fees. It reports each loan's monthly payment, total repaid, total interest and fees, then declares a winner and states exactly how much choosing it saves.
How It Works
Each loan is amortized independently with the standard fixed-payment formula:
- The monthly payment is computed from the principal, the monthly rate (annual rate ÷ 12) and the term in months. A 0% rate simply divides the principal by the term.
- Total repaid is the payment times the number of months; total interest is total repaid minus principal.
- Total cost adds the loan's fees — origination, application or settlement charges — to the total repaid.
- The loan with the lower total cost wins. The tool reports the differences in monthly payment, total interest and total cost, plus a plain-language savings statement naming the winner and the amount saved.
Because the winner is decided on total cost rather than the interest rate or the monthly payment, a loan with a slightly higher rate but no fees can beat a cheaper-rate loan carrying heavy fees — the worked example shows exactly that.
The Formula
where is the principal, the monthly rate, the term in months, and the monthly payment.
Input Parameters
| Parameter | Unit | Description | |---|---|---| | Principal (A and B) | Currency | The amount borrowed under each offer. | | Interest Rate (A and B) | % per year | The annual rate for each loan; 0% is accepted. | | Term (A and B) | Months | Repayment length in months — 60 for five years, 360 for a 30-year mortgage. | | Fees (A and B) | Currency | Upfront and lender fees for each loan; optional, defaults to zero. |
Worked Example
You are borrowing $30,000 over 60 months and hold two offers:
- Loan A: 4.9% annual rate, no fees. Payment: 33,885.82, of which interest is 33,885.82.
- Loan B: 4.5% annual rate, 559.29 a month — 33,557.43, of which interest is 328.39 less interest than A. But adding the fees gives a total cost of $34,757.43.
**Loan A wins, saving 328.39 over five years; its fees cost $1,200. This is precisely the trap the comparison exists to catch: judging by rate, or by monthly payment, picks the more expensive loan.
Interpreting the Results
- Total cost is the verdict; the other figures explain it. Monthly payment difference tells you about cash flow, interest difference tells you about the price of time, and the fees explain why they can point in opposite directions.
- Different principals and terms are allowed. You can compare a 48-month loan against a 60-month one, or a smaller loan against a larger one — but read the result carefully: a longer term usually shows a lower payment and a higher total cost.
- A tie is possible. Identical total costs produce an explicit tie result rather than an arbitrary winner.
When the Losing Loan Might Still Be Right
Total cost is not the only consideration. A loan with a lower monthly payment may fit a tight budget even at a higher lifetime cost, and the winner here assumes you keep each loan for its full term — if you expect to repay early or refinance, the fee-heavy loan's disadvantage shrinks (and prepayment penalties, which this tool does not model, could change the picture entirely).
Limitations
- Fixed rates only. Both loans are modeled at a constant rate for the full term; variable-rate and introductory-rate offers cannot be represented faithfully.
- Fees are a single lump sum. Ongoing monthly account fees are not modeled separately — fold an estimate of them into the fees field if a lender charges them.
- No taxes, insurance or escrow. For mortgages, the comparison covers principal, interest and fees only.
Frequently Asked Questions
Why does the winner use total cost instead of total interest?
Because fees are real money you pay. A loan can charge less interest and still cost more overall once origination or settlement fees are included, as the worked example shows. Total cost is the only figure that captures both.
Can I compare loans of different amounts or terms?
Yes — each side takes its own principal, rate, term and fees. Comparing different terms is common (48 versus 60 months, or 15 versus 30 years for a mortgage): expect the shorter term to show a higher payment but usually a lower total cost.
What fees should I enter?
Anything the lender charges you to get the loan: origination, application, document or settlement fees, and points converted to dollars. If a lender quotes an APR instead of a note rate, that APR already bakes typical fees into the rate — in that case enter the APR and leave fees at zero to avoid counting them twice.