Loan Comparison Calculator

Compare two loan offers side by side by payment, interest, and total cost

Loan Comparison Calculator

Compare two loan offers side by side by payment, interest, and total cost

Loan Comparison Calculator

Compare two loan offers side by side by payment, interest, and total cost

Loan Comparison Calculator

Compare up to 3 loan offers side-by-side to find the best deal

Loan 1

Loan Amount

Interest Rate (%)

Term (Years)

Fees

Loan 2

Loan Amount

Interest Rate (%)

Term (Years)

Fees

Loan 3

Loan Amount

Interest Rate (%)

Term (Years)

Fees

Why Comparing Loans Matters

Choosing the wrong loan can cost thousands in unnecessary interest. Even a 1% difference in interest rate on a $20,000 loan over 5 years costs $1,100 extra. Most borrowers accept the first offer without shopping around, but comparing multiple lenders takes 30 minutes and saves an average of $2,500-5,000. Banks, credit unions, and online lenders all offer different rates, terms, and fees - the cheapest monthly payment isn't always the best deal.

This calculator helps you compare loans apples-to-apples by calculating the true total cost including all interest and fees. Focus on total cost first, then monthly payment. A slightly higher payment for fewer years often saves substantially more in interest. Always compare at least 3-5 loan offers before deciding, and use pre-qualification (soft credit check) to compare rates without hurting your credit score.

APR vs Interest Rate: Know the Difference

🔢 Interest Rate (Note Rate)

The percentage charged on the loan principal:

• Determines your monthly payment amount
• Simple to understand: 6% means 6% annual interest on borrowed amount
• Does NOT include fees, closing costs, or other charges
• Example: 5% interest on $20,000 = ~$377/month for 5 years
• Can be misleading if fees are high

💰 APR (Annual Percentage Rate)

The true cost of borrowing including fees:

• Includes interest rate PLUS all fees and costs
• Origination fees, processing fees, points, and other charges factored in
• Always higher than interest rate (unless fees are zero)
• Example: 5% interest + $1,000 fees = 5.8% APR
• Required by law (Truth in Lending Act) for accurate comparison
• THIS is the number to compare between lenders

⚠️ Why This Matters

Real-world example of how fees change everything:

• Lender A: 5.0% rate, $1,500 fees = 5.9% APR, $22,661 total cost
• Lender B: 5.5% rate, $300 fees = 5.7% APR, $22,489 total cost (BETTER)
• Lender B has higher interest rate but lower total cost
• Always compare APR and total cost, not just monthly payment
• Lenders use low rates with high fees to appear competitive

Smart Loan Shopping Strategies

Get Pre-Qualified with Multiple Lenders

Pre-qualification uses soft credit checks that don't hurt your score. Apply to 3-5 lenders within 14 days (counted as one inquiry). Compare: banks (relationship discounts), credit unions (typically 0.5-1% lower rates), online lenders (fast, competitive), and peer-to-peer platforms. Credit unions often offer the best rates but require membership. Each lender sees your credit differently, so rates vary by 1-3 percentage points for the same borrower.

Understand Rate vs Term Tradeoffs

Shorter terms (3 years) have lower interest rates but higher payments. Longer terms (7 years) have higher rates but lower payments. On a $25,000 loan: 3 years at 5% = $749/month, $1,964 interest. 5 years at 6% = $483/month, $3,982 interest. 7 years at 7% = $375/month, $6,461 interest. Choose shortest term you can afford - each extra year costs thousands in interest. Paying extra principal on a longer-term loan gives you flexibility without the rate penalty.

Negotiate Fees and Rates

Everything is negotiable. If you have competing offers, show Lender A that Lender B offered 5.5% and ask them to match or beat it. Origination fees (0.5-1% of loan) can often be waived or reduced for good credit. Doc fees, processing fees, and application fees are pure profit - negotiate them down or walk. Ask about rate discounts for: auto-pay (0.25-0.50%), existing accounts (0.25%), and short term length (0.25%). These stack - you could get 1% off just by asking.

Read the Fine Print for Penalties

Check for: prepayment penalties (fee for paying off early, avoid these), late payment fees ($25-50 per occurrence), origination fees deducted from loan amount (get $20,000 but owe $20,500), and variable vs fixed rates (variable can increase). Some loans charge interest on original amount even after you pay down principal (precomputed interest). Avoid any loan with prepayment penalties - you want the flexibility to refinance or pay off early if your situation improves.

When Refinancing Makes Sense

✅

Interest Rate Drops 1%+

Refinancing saves money if new rate is at least 1% lower. On $15,000 remaining, 1% = $400-600 saved. Check break-even point vs fees.

✅

Credit Score Improved

If your score jumped 50+ points since original loan, you likely qualify for better rates. 640→720 could save 2-4 percentage points.

✅

Need Lower Payments

Financial hardship? Extend term to reduce payments. But this increases total interest paid. Only do this if necessary for cash flow relief.

✅

Shorten Loan Term

Income increased? Refinance from 7-year to 3-year loan at lower rate. Higher payment but save thousands in interest and pay off faster.

Frequently Asked Questions

How much can I save by comparing loan offers?

The average borrower saves $2,500-5,000 by comparing at least 3 lenders instead of accepting the first offer. On a $25,000 auto loan, the difference between a 7% rate and 5% rate over 5 years is $2,800 in interest. Credit union rates are typically 0.5-1.5% lower than banks for the same borrower. Online lenders can be even lower due to reduced overhead. Even comparing two offers from the same bank type saves an average of $800-1,500. The time investment (2-3 hours) has an effective hourly rate of $500-1,500 - worth it for almost everyone.

What's the difference between APR and interest rate?

Interest rate is the percentage charged on the principal amount borrowed. APR (Annual Percentage Rate) includes the interest rate PLUS all fees and costs, expressed as a yearly rate. APR is always higher than interest rate unless fees are zero. For example: 6% interest rate with $1,000 in fees might have a 6.8% APR. The APR gives you the true cost of borrowing and is the best number to compare between lenders. A loan with 5.5% interest and high fees could have a higher APR (and cost more) than a loan with 6% interest and low fees. Always ask for both numbers and compare APRs.

Does checking loan rates hurt my credit score?

Pre-qualification uses soft credit checks that don't affect your score. However, formal applications use hard inquiries that drop your score 2-5 points each. Good news: multiple loan inquiries within 14-45 days (depending on scoring model) count as a single inquiry. This "rate shopping window" lets you compare offers without score damage. Apply to all lenders within 14 days to be safe. After that period, each new inquiry counts separately. Avoid applying to more than 6 lenders total, as too many inquiries raises red flags. Focus on pre-qualification first, then formal applications only for your top 2-3 choices.

Is it worth paying fees for a lower interest rate?

It depends on the break-even point. Calculate: fees paid ÷ monthly savings = break-even months. Example: Paying $1,000 fee to drop from 6% to 5% saves $20/month on $20,000 loan. Break-even = 50 months (4+ years). If you keep the loan that long, it's worth it. If you'll pay off or refinance in 2 years, you lose money. Generally avoid high fees unless: (1) you're certain to keep the loan past break-even, (2) the rate reduction is 0.75%+, or (3) the fees are waived or minimal. Many lenders offer "no fee" loans at slightly higher rates - often the better choice for shorter-term loans.

Should I choose the lowest monthly payment?

Not necessarily. Lower payments usually mean longer loan terms, which means far more interest paid over time. Example: $20,000 at 7% for 3 years = $618/month, $2,271 interest. Same loan for 7 years = $296/month, $4,837 interest. You pay $2,566 extra for the "convenience" of lower payments. Choose the shortest term you can comfortably afford. If emergencies arise, you can refinance later. Starting with a long term locks you into maximum interest. Exception: if you invest the payment difference at higher returns (8%+ in stock market vs 6% loan), longer terms could work - but this requires discipline most people lack.

When should I refinance an existing loan?

Refinance when: (1) Rates drop 1%+ from your current rate, (2) Your credit score improved 50+ points since original loan, (3) You need lower payments due to financial hardship, (4) You want to pay off faster with a shorter term, or (5) Your current loan has high fees or prepayment penalties expiring. Calculate break-even: if refinance fees are $500 and you save $50/month, break-even is 10 months. Refinance if you'll keep the loan past that point. Don't refinance if: you're close to paying off (final 1-2 years), fees exceed savings, or you plan to pay off within 12 months. Check for prepayment penalties on current loan first.

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