How it works
Comparing loans requires the full picture, not just the monthly payment — a longer term always lowers the payment while raising total interest. The engine amortises both loans at their own amount, rate and term, and reports payment, total cost and interest side by side, with the interest difference as the headline. The classic result: Loan A at 9.5% over 48 months costs $5,179 of interest; Loan B at 12% over 60 months costs $8,436 — the lower payment of B is a trap built from a longer term. The comparison also exposes the APR gap: a loan with a lower quoted rate but higher fees can cost more than the one with the honest rate. When the amounts differ, the interest-difference line loses meaning and the comparison should focus on the rates — the engine keeps all three numbers visible so the context survives. Lenders sell payments; the tool sells the total.
Formula
Payment = P x r(1+r)^n / ((1+r)^n - 1) per loan | Interest = payment x n - P
Tips
- Compare total interest, then payment — never the reverse order.
- When rates are equal, the shorter term is the cheaper loan, full stop.
- Check the APR column, not the headline rate: fees hide in the gap.
- Include the origination fee in the amount so the comparison is apples to apples.
Frequently asked questions
- How do I compare two loans fairly?
- Keep the amount and term equal, then compare rates — or keep the rate equal and compare terms. The engine makes every combination visible; the trap to avoid is comparing a long-term loan's low payment against a short-term loan's higher one and calling the first cheaper.
- Which matters more, rate or term?
- Rate decides the cost per dollar borrowed; term decides how many dollars of interest accumulate. Both matter, and the total interest line combines them. A slightly higher rate over a much shorter term can still be the cheaper loan.
- What is APR and why does it differ from the rate?
- APR folds in fees — origination, points, insurance — into an effective annual rate. A loan quoted at 9% with 2% of fees is more expensive than a 9.5% loan with no fees. Compare APR when fees exist; the engine's amount input should include them.
- Can I compare loans with different amounts?
- Yes, but the interest-difference line becomes misleading — compare the rates and the per-100k costs instead. The full table still helps: it shows the dollar cost of each choice, which is what your budget actually faces.