⚖️ Loan Comparison Calculator
By ToolNimba Finance Team · Reviewed by ToolNimba Editorial Review, personal finance content · Updated 2026-06-19
This calculator compares estimates only. The true cost of each loan also depends on the lender's fees, insurance, the exact compounding and day-count convention, and whether the rate is fixed or floating. The result is not financial advice, confirm the final figures in each loan agreement and speak to a qualified adviser before borrowing.
| Metric | Loan A | Loan B |
|---|---|---|
| Monthly payment | - | - |
| Total interest | - | - |
| Total cost (principal + interest) | - | - |
This loan comparison calculator puts two loans side by side so you can see which one actually costs less. Enter the amount, annual interest rate and term for Loan A and Loan B, and it works out each monthly payment, the total interest, the total cost, and the difference between them. A lower headline rate or a smaller monthly payment does not always mean the cheaper deal, so comparing the full picture is the only reliable way to choose.
What is the Loan Comparison Calculator?
Each loan here is priced with the standard reducing-balance (amortizing) method, the same one banks use for mortgages and most consumer loans. The monthly payment is the level amount that clears the balance to zero over the term, given by payment = P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the amount borrowed, r is the monthly rate (annual rate / 12 / 100) and n is the number of months. Multiply the payment by n to get the total cost, then subtract the principal to get the total interest. The calculator runs this twice, once per loan, and reports the gap.
The reason a side-by-side comparison matters is that three levers move at once: amount, rate and term. A loan with a lower interest rate but a longer term can easily cost more in total than a slightly higher rate over a shorter term, because you are paying interest for more months. Likewise the loan with the smaller monthly payment is often the more expensive one overall, since a low payment usually comes from stretching the term out. Looking only at the rate, or only at the monthly figure, can lead you to the wrong choice.
Total cost is the fairest single yardstick when the amount borrowed is the same, because it captures both the rate and the term in one number. When the amounts differ, compare the total interest as a share of what you borrow, and remember that fees and charges (which this tool does not include) can change the ranking. The annual percentage rate (APR), which folds fees into the rate, is the regulated figure designed for exactly this kind of apples-to-apples comparison.
When to use it
- Comparing two offers for the same purchase, such as two car loans or two personal loans, to see which costs less overall.
- Weighing a shorter term at a higher rate against a longer term at a lower rate.
- Deciding whether refinancing an existing loan into a new one actually saves money once the new term is taken into account.
- Checking whether a lender's "lower monthly payment" offer is genuinely cheaper or just spread over more months.
How to use the Loan Comparison Calculator
- Enter the amount, annual interest rate and term for Loan A.
- Enter the amount, annual interest rate and term for Loan B.
- Choose years or months for each term using the dropdown.
- Read the side-by-side table of monthly payment, total interest and total cost.
- Check the verdict box to see which loan is cheaper overall and by how much.
Formula & method
Worked examples
Loan A is $20,000 at 8% over 5 years (60 months). Loan B is $20,000 at 7% over 6 years (72 months). Which is cheaper overall?
- Loan A: r = 8 / 12 / 100 = 0.0066667, (1 + r)^60 = 1.489846
- Loan A payment = 20,000 x 0.0066667 x 1.489846 / (1.489846 - 1) = 405.53
- Loan A total cost = 405.53 x 60 = 24,331.67, interest = 4,331.67
- Loan B: r = 7 / 12 / 100 = 0.0058333, (1 + r)^72 = 1.520106
- Loan B payment = 20,000 x 0.0058333 x 1.520106 / (1.520106 - 1) = 340.98
- Loan B total cost = 340.98 x 72 = 24,550.57, interest = 4,550.57
- Difference = 24,550.57 - 24,331.67 = 218.90
Result: Loan A is cheaper overall by about $218.90, even though Loan B has the lower rate and the lower monthly payment, because B runs for an extra year.
Loan A is $15,000 at 6% over 3 years (36 months). Loan B is $15,000 at 5.5% over 4 years (48 months).
- Loan A: r = 6 / 12 / 100 = 0.005, (1 + r)^36 = 1.196681
- Loan A payment = 456.33, total cost = 456.33 x 36 = 16,427.85, interest = 1,427.85
- Loan B: r = 5.5 / 12 / 100 = 0.0045833, (1 + r)^48 = 1.245451
- Loan B payment = 348.85, total cost = 348.85 x 48 = 16,744.66, interest = 1,744.66
- Difference = 16,744.66 - 16,427.85 = 316.81
Result: Loan A is cheaper overall by about $316.81. Loan B lowers the monthly payment by roughly $107 but adds a full year and about $317 of extra interest.
Total cost of a $10,000 loan: how rate and term interact (reducing balance)
| Loan terms | Monthly payment | Total interest | Total cost |
|---|---|---|---|
| 10% over 3 years (36 mo) | $322.67 | $1,616.19 | $11,616.19 |
| 9% over 3 years (36 mo) | $318.00 | $1,447.90 | $11,447.90 |
| 10% over 4 years (48 mo) | $253.63 | $2,174.04 | $12,174.04 |
| 9% over 4 years (48 mo) | $248.85 | $1,944.82 | $11,944.82 |
What to compare when choosing between two loans
| Figure | What it tells you | When it matters most |
|---|---|---|
| Monthly payment | Whether the loan fits your budget | Cash flow is tight month to month |
| Total interest | The price of borrowing over the term | Amounts borrowed are equal |
| Total cost | Everything you repay, principal plus interest | The single best overall yardstick |
| APR | Rate including most fees | Loans have different fee structures |
Common mistakes to avoid
- Comparing loans by interest rate alone. A lower rate over a longer term can cost more in total than a higher rate over a shorter term. The number of months you pay interest matters just as much as the rate itself.
- Choosing the loan with the smaller monthly payment. A low monthly payment usually comes from a longer term, which means more total interest. The cheaper monthly figure is often the more expensive loan overall.
- Ignoring fees and charges. Processing fees, insurance and prepayment penalties are not in the payment and are not included here. Two loans with the same total cost can differ once fees are added, which is why APR is the regulated comparison figure.
- Comparing loans of different amounts at face value. If the two loans are for different amounts, the bigger total cost may simply reflect more money borrowed. Compare total interest as a share of the amount borrowed instead.
Glossary
- Principal
- The amount you borrow, before any interest is added.
- Monthly payment
- The fixed amount paid each month that combines interest and principal and clears the loan over its term.
- Total interest
- The sum of all interest paid over the life of a loan: total cost minus principal.
- Total cost
- Everything you repay across the whole term: principal plus total interest.
- Term
- The length of the loan, expressed in months or years (n in the formula).
- APR
- Annual Percentage Rate, the interest rate with most fees folded in, designed to compare loans fairly.
Frequently asked questions
How do I tell which of two loans is cheaper?
Compare the total cost (principal plus all interest) when the amounts are the same. The loan with the lower total cost is cheaper overall. This calculator works out both totals and shows the difference, so you do not have to add it up by hand.
Why can a loan with a lower interest rate cost more?
Because the term also matters. A lower rate spread over more months can rack up more total interest than a higher rate over a shorter term. You pay interest for longer, and that can outweigh the smaller rate.
Should I pick the loan with the lower monthly payment?
Not automatically. A smaller monthly payment usually means a longer term, which increases the total interest you pay. Choose the lower payment only if you need the cash flow relief and can accept the higher overall cost.
Does this calculator include fees?
No. It compares the loans on amount, rate and term using the reducing-balance method. Processing fees, insurance and penalties are not included, so check each loan agreement and compare the APR, which folds fees into the rate.
Can I compare loans of different amounts?
Yes, but read the result carefully. A larger total cost may just mean you borrowed more. When the amounts differ, compare the total interest as a percentage of the amount borrowed to judge which loan is the better value.
What method does the comparison use?
Each loan is priced with the standard reducing-balance (amortizing) formula, where interest is charged only on the outstanding balance. This is the method banks use for mortgages and most consumer loans, so the figures line up with a typical lender quote.
Sources
- Comparing loan options , U.S. Consumer Financial Protection Bureau
- Annual Percentage Rate (APR) , Investopedia