Question 1

How do I compare loans?

Accepted Answer

To compare loans effectively, gather the same information for each loan: loan amount, APR (Annual Percentage Rate), loan term, and any fees. Enter this information into the calculator and select your comparison metric (lowest monthly payment, lowest total interest, or lowest total cost). The calculator will show you which loan is best for your selected metric and provide a side-by-side comparison table.

Question 2

What is APR?

Accepted Answer

APR (Annual Percentage Rate) is the annual interest rate charged on your loan. It represents the true cost of borrowing money. When comparing loans, APR is one of the most important factors because it directly affects your monthly payment and total interest. A lower APR means lower payments and less total interest, even if other factors (like fees) are the same.

Question 3

What is the difference between monthly payment and total interest?

Accepted Answer

Monthly payment is what you pay each month (principal + interest). Total interest is the total amount of interest you pay over the entire loan term. A loan with a lower monthly payment may have higher total interest if it has a longer term. Always consider both metrics when comparing loans - lower monthly payments are easier on your budget, but lower total interest saves money overall.

Question 4

Is a longer loan term better?

Accepted Answer

Longer loan terms reduce monthly payments but increase total interest. For example, a $20,000 loan at 8% costs $2,562 in interest over 3 years but $4,332 over 5 years. Longer terms are better if you need lower monthly payments and can afford the extra interest. Shorter terms are better if you want to minimize total cost and can afford higher payments.

Question 5

What fees should I include when comparing loans?

Accepted Answer

Include all upfront fees: origination fees, application fees, processing fees, and any other one-time charges. Don't include ongoing fees like late payment fees or prepayment penalties (unless you plan to pay late or prepay). Fees are important because they increase your total cost - a loan with a lower APR but high fees may cost more overall than a loan with a slightly higher APR but no fees.

Question 6

Should I refinance my loan?

Accepted Answer

Refinancing can be beneficial if you can get a lower APR, shorter term, or both. However, refinancing has costs (closing fees, etc.) that must be considered. Use this calculator to compare your current loan with potential refinance offers. Calculate the break-even point - how long it takes for savings to exceed refinancing costs. If you plan to stay in the loan long enough, refinancing can save money.

Question 7

How do extra payments affect loan comparison?

Accepted Answer

Extra payments reduce your loan term and total interest paid. When comparing loans, if you plan to make extra payments, enter them in the calculator to see the true cost difference. A loan that looks worse without extra payments may become better with extra payments if it has more favorable terms for early payoff. Extra payments are most effective on loans with higher interest rates.

Question 8

What is the difference between fixed and variable interest rates?

Accepted Answer

Fixed rates stay the same for the entire loan term, making payments predictable. Variable rates can change based on market conditions, making payments unpredictable. This calculator assumes fixed rates. For variable rate loans, use the initial rate as a baseline, but understand that payments may increase. Fixed rates are generally safer for budgeting, while variable rates may start lower but carry risk.

Question 9

How accurate is this loan comparison?

Accepted Answer

This comparison is accurate for standard fixed-rate loans with fixed monthly payments. It assumes: payments are made on time, interest compounds monthly, no prepayment penalties (unless specified), and standard amortization. Actual results may vary due to: variable rates, payment timing, lender-specific terms, or fees not included. Always verify with lenders for exact amounts and terms.

Question 10

What if loans have different amounts?

Accepted Answer

You can compare loans with different amounts. The calculator will show monthly payments, total interest, and total cost for each loan. However, comparing different amounts can be misleading - a $10,000 loan will always have lower payments than a $20,000 loan. For fair comparison, try to compare loans for the same purpose or normalize the amounts. The comparison is most useful when loan amounts are similar.

Question 11

Can I compare more than 2 loans?

Accepted Answer

Yes, this calculator supports comparing 2-5 loans. Enter details for Loan A, Loan B, and optionally Loan C, D, and E. The comparison table will show all loans side-by-side, making it easy to see which loan is best for your selected metric. Comparing more loans gives you more options but can make the decision more complex.

Question 12

What if I can't afford the monthly payment of the "best" loan?

Accepted Answer

If the loan with the lowest total cost has a monthly payment you can't afford, you may need to choose a loan with a longer term (higher total cost but lower monthly payment). Use the "Lowest Monthly Payment" metric to find the most affordable option. However, remember that longer terms increase total interest - try to find a balance between affordability and total cost.

Question 13

How do I know which comparison metric to use?

Accepted Answer

Use "Lowest Monthly Payment" if budget is your primary concern and you need the most affordable monthly payment. Use "Lowest Total Interest" if you want to minimize the cost of borrowing and can afford higher payments. Use "Lowest Total Cost" if you want the most economical loan overall, considering both interest and fees. Consider your financial situation and goals when choosing a metric.

Loan Comparison Calculator

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Calculation Examples

Example 1: Same Amount, Different APR

Example 2: Same APR, Different Terms

Example 3: Fees vs Lower APR

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