Loan Comparison Calculator
✦ Finance & MoneyUse this free loan comparison calculator to compare up to four loan offers side by side — monthly payment, APR, total cost, and how much each loan costs over the time you actually plan to keep it.
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- ✓ Formula and sources shown
The formula
Level-payment amortization with Reg Z APR
PMT = P × [r(1+r)^n] / [(1+r)^n − 1] | APR: net_proceeds = PMT × [1 − (1+i)^−n] / iP = principal (loan amount + financed fees); r = annual rate ÷ 12; n = term in months. Reg Z APR solves for the monthly rate i such that the Amount Financed (loan amount − fees paid upfront; a fee added to the principal is a finance charge, so it is not part of the Amount Financed) equals the PV of the scheduled payments; APR = i × 12. With no fees at all, APR equals the stated rate. Horizon cost = payments made through year H + upfront fees + remaining balance — what a borrower who sells or refinances actually pays.
Calculating it by hand
- Enter the loan amount, interest rate and term for each offer (at least two).
- Add any fees: financed fees raise the principal you repay; upfront fees leave your pocket on day one and raise the APR.
- Set the horizon — the years you plan to keep the loan before selling, refinancing or paying off.
- Read the APR row: this is the cost rate that includes fees, computed to Reg Z (TILA) rules.
- Read the horizon cost row: this is how much each loan actually costs over your hold period.
- Open the amortization schedule under each offer to verify every payment period, or download the CSV.
Worked examples
Two offers, same amount and term, different rates and fees
Offer A: $20,000 at 6.50%, 48 months, no fees.r = 0.065 / 12 = 0.005417; (1.005417)^48 = 1.29602; PMT = 20000 × 0.005417 × 1.29602 / (1.29602 − 1) = $474.30/mo.APR = 6.50% (no fees → APR = stated rate). Total interest over the schedule = $2,766.35 (47 × $474.30 plus a final payment that clears the rounding residual, minus $20,000).Offer B: $20,000 at 6.50%, 48 months, $400 upfront origination fee.PMT is the same ($474.30) — rate and term unchanged.Net proceeds = $20,000 − $400 = $19,600. Solve i s.t. 19600 = 474.30 × [1 − (1+i)^−48] / i → i = 0.006286/mo → APR = 7.54%.4-year horizon cost A = $22,766.35 of payments + $0 fees + $0 balance = $22,766 (fully paid off). Horizon cost B = $22,766.35 + $400 = $23,166.Verdict: Offer A costs $400 less over 4 years — exactly the fee, because the rate and term are identical.
Offer A: PMT $474.30, APR 6.50%, total cost $22,766. Offer B: PMT $474.30, APR 7.54%, total cost $23,166. Offer A saves $400.
Three offers — lower rate with higher fees vs higher rate with no fees
Offer A: $15,000, 5.90%, 60 months, $0 fees. r = 0.059/12 = 0.004917; PMT = $289.30. APR = 5.90%. Total interest = $2,357.66.Offer B: $15,000, 6.75%, 60 months, $0 fees. r = 0.0675/12 = 0.005625; PMT = $295.25. APR = 6.75%. Total interest = $2,715.14.Offer C: $15,000, 5.50%, 60 months, $450 upfront fee. r = 0.055/12 = 0.004583; PMT = $286.52. Total interest = $2,191.02.Net proceeds C = 15000 − 450 = $14,550. Solve 14550 = 286.52 × [1 − (1+i)^−60] / i → i = 0.005640/mo → APR = 6.77%.Total cost C = $17,191.02 of payments + $450 = $17,641.3-year horizon cost A = 36 payments ($10,414.80) + balance at month 36 ($6,533.77) = $16,949.3-year horizon cost B = $10,629.00 + $6,611.28 = $17,240. Horizon cost C = $10,314.72 + $450 + $6,497.53 = $17,262.Over 3 years Offer A beats C by $314: C's lower rate saves $100 of payments and $36 of balance, but its $450 fee outweighs that.
Over 3 years: Offer A $16,949 (APR 5.90%), Offer B $17,240 (APR 6.75%), Offer C $17,262 (APR 6.77%). Kept 5 years, Offer A still costs $283 less than C ($17,358 vs $17,641).
Lower rate with no fee vs higher rate with a financed fee (the calculator's defaults)
Offer A: $20,000 at 6.50%, 48 months, no fees → PMT $474.30; total cost $22,766.35.Offer B: $20,000 at 7.25%, 48 months, $300 fee financed → principal $20,300; r = 0.0725/12 = 0.006042; PMT = $488.47.Offer B total interest = $3,146.38 on $20,300; total cost = $20,300 + $3,146.38 = $23,446.38. Its APR is 8.02%, not 7.25%: the $300 financed fee is a finance charge, so the Amount Financed is $20,000 (solve 20,000 = 488.47 × [1 − (1+i)^−48] / i).Horizon 4 years = the full term, so horizon cost = total cost for both offers.Difference = $23,446.38 − $22,766.35 = $680.03: $300 of financed fee plus $380 more interest at the higher rate.
Lowest cost over 4 years: $22,766 (Offer A) — $680 less than Offer B ($23,446). Payment $474.30 vs $488.47; APR 6.50% vs 8.02%.
Methodology
How loan comparison actually works
Most people compare loans by monthly payment alone — but a lower payment often means a longer term and more total interest. The number that matters is what each loan costs over the time you actually plan to keep it.
Read sources and limitsWhy compare loans by APR instead of the interest rate?
Two lenders can quote the same interest rate and charge very different amounts. The difference hides in the fees. Lender A offers 7% with no origination fee; Lender B offers 7% with a $500 origination fee deducted from your proceeds.
Both quote 7%, but Lender B effectively lends you $19,500 while you repay $20,000 — your real borrowing cost is higher. The Annual Percentage Rate (APR) captures this by solving for the rate that equates the cash you actually receive to the present value of all your payments.
This is what the Truth in Lending Act (Regulation Z, 12 CFR Part 1026) requires lenders to disclose: the APR must include all finance charges, not just the periodic interest. The calculator uses the same actuarial method (Appendix J) that lenders use on the Loan Estimate form, so you can verify any quoted APR directly against this tool.
How do you compare loans you will not keep to the end?
If you plan to keep a loan for its full term, total cost is the right comparison metric — the sum of every payment plus any upfront fees. But if you expect to sell the asset (a car, a home), refinance, or pay the loan off early, the full-term cost is the wrong number.
You only pay the payments you actually make, plus you still owe the remaining balance when you stop.
The horizon cost field lets you set the years you realistically plan to hold the loan. The calculator then shows: payments through that date, plus the remaining balance you would need to settle, plus any upfront fees you paid at closing. This is the true cash-out figure for your situation — and it can reverse the ranking compared to total cost. A loan with a slightly higher rate but lower fees can cost less over five years than a lower-rate loan with heavy fees, even if the full-term total cost is higher.
Do financed fees or upfront fees cost more?
A financed fee increases your loan principal. You borrow more, so your monthly payment is higher and you pay interest on the fee for every period of the loan. A $500 fee financed into a $20,000 loan at 7% over 48 months raises the payment from $478.92 to $490.90 and adds $74.66 of interest — the fee effectively costs $574.66.
A financed fee also raises the APR. Under Regulation Z (12 CFR 1026.4) it is still a finance charge, so the Amount Financed stays $20,000 while you repay $20,500: the APR on that loan is 8.28%, not the 7% note rate. This calculator computes it that way, the same way a lender's Loan Estimate does.
An upfront fee hits your cash at closing but does not compound. It raises your APR (because you receive less cash than you repay) without changing your monthly payment. For a short hold period, upfront fees can be more expensive because you have not had enough time for the lower principal to compensate. For a full-term hold, financed fees are usually costlier because they compound. The horizon cost calculation handles both correctly — it is the only metric that ranks the two accurately for your specific hold period.
How should you read the lowest and highest labels?
The results table shows the lowest and highest value for each metric across your offers. "Lowest" is highlighted for cost metrics (lower is better) and labelled plainly. No offer is declared "best" — that depends on your priorities and your hold period, which only you know.
The verdict lines are signposts, not conclusions. An offer may have the lowest monthly payment (good for cash flow) while also having the highest total cost (bad for full-term holders). The horizon cost row is the single most useful comparison for most borrowers: it ranks the offers on what you actually pay under your assumptions, not under the lender's 30-year scenario.
What mistakes do people make when comparing loan offers?
Using APR to compare loans with very different terms is the most common error. APR penalises longer-term loans because the same upfront fee is spread over more periods — a $500 fee on a 24-month loan raises APR more than the same fee on a 60-month loan, even though the dollar cost is identical.
For different-term comparisons, horizon cost is the correct metric.
Ignoring the "break-even" on fees is the second common mistake. If you plan to sell in two years, a loan with lower fees but a higher rate may cost less than one with a higher rate and zero fees — or vice versa. The horizon cost row shows the answer directly. Set the horizon honestly, not optimistically, and compare the numbers under that assumption.
Loan Comparison questions
What is APR and how is it different from the interest rate?
The interest rate is the annual cost of borrowing expressed as a percentage of the principal — it determines your monthly payment. The APR (Annual Percentage Rate) is the interest rate plus the annualised effect of fees and other finance charges, expressed as a percentage of the cash you actually receive (the net proceeds). A loan with a 7% rate and a $500 origination fee will have an APR above 7% — the exact amount depends on the term. This calculator uses the Reg Z actuarial method (12 CFR Part 1026, Appendix J), which is the same method lenders use on the required Loan Estimate disclosure.
Should I choose the loan with the lower rate or the lower fees?
It depends on how long you plan to keep the loan. Upfront fees are a fixed cost — if you hold the loan for its full term, that cost is spread over many payments and may be worth paying for a lower rate. If you plan to sell, refinance or pay off early, upfront fees hurt more because you pay them on day one but enjoy the lower rate for only a short period. Set your horizon in this calculator and compare the horizon cost row — that is the decision metric for your specific situation, not APR alone.
What is a horizon cost and why does it matter?
Horizon cost is the total cash you spend on a loan over the time you actually plan to keep it: the sum of your payments through that date, plus any upfront fees you paid at closing, plus the remaining balance you would need to settle when you sell or refinance. For borrowers who do not hold a loan to maturity — which describes most car buyers and many mortgage holders — horizon cost is a more accurate comparison metric than full-term total cost or even APR. APR assumes you hold the loan to maturity; horizon cost uses your actual plans.
How much does a $400 origination fee add to the APR on a $20,000 loan?
On $20,000 at 6.5% over 48 months, a $400 fee taken from the proceeds raises the APR from 6.50% to 7.54%: the $474.30 payment does not change, but it now repays $19,600 of cash, which solves to a monthly rate of 0.6286%. The same $400 on a 24-month loan would raise the APR more, because the fee is spread over fewer payments. In dollars the fee costs exactly $400 either way — which is why this calculator also shows total cost and horizon cost.
Which loan comparison metric should I focus on?
If you will hold the loan to the end and the offers have the same term: APR ranks them correctly (with different terms, compare total cost). If you plan to sell or refinance before the end: horizon cost is the right metric. Monthly payment matters if your cash flow is constrained, but note that the offer with the lowest payment often has the highest total cost. The verdict lines in this calculator mark the lowest value for each metric — read them row by row, not as a single winner. No single number is "best"; the right choice depends on your priorities.
Can I use this calculator for auto loans, student loans and personal loans?
Yes. This calculator handles any fixed-rate level-payment instalment loan: auto, personal, student, business, or any other loan where you make equal monthly payments over a set term. It is not suitable for mortgages with property tax, homeowners insurance, PMI or points — use the Mortgage Comparison Calculator for those. It also does not model variable-rate or interest-only loans, which are declined because the payment schedule is not fixed.
How are financed fees different from upfront fees?
A financed fee is added to the loan principal: you borrow an extra $500 (for example) and repay it with interest over the full term, so your payment and total interest rise — $500 financed into $20,000 at 7% over 48 months adds $11.98 a month and $74.66 of interest. An upfront fee is deducted from your proceeds: the lender disburses $500 less than the face amount, but you repay the full amount, so your payment is unchanged and the APR rises. A financed fee raises the APR too: Regulation Z counts it as a finance charge, so the Amount Financed stays $20,000 — that $500 financed at 7% over 48 months is an 8.28% APR, which is what this calculator shows.
Why does the same loan sometimes show a higher APR than its stated interest rate?
The stated interest rate determines your monthly payment on the face principal. The APR is computed on the net proceeds — the cash you actually receive after upfront fees. Whenever there are upfront fees, net proceeds is less than the face principal, so the present value of your payments is greater than the cash you received, which means the implied rate is higher than the stated rate. A financed origination fee does the same thing: it is still a finance charge under Regulation Z, so the Amount Financed is the loan amount without the fee and the APR lands above the note rate. Only a loan with no fees at all has an APR equal to its rate.
Source notes
Method, sources & limitations
Every figure on this page comes from the formula above applied to the values you enter. Nothing is estimated from market data, and no result is a forecast. These are the sources behind the method and any fixed figures it uses:
- CFPB — Regulation Z / TILA (12 CFR Part 1026, Appendix J — actuarial APR method)
- CFPB — What is the difference between a mortgage interest rate and the APR?
- Federal Reserve — Consumer Guide to Mortgages (amortization and APR)
- CFPB — Loan Estimate and Closing Disclosure explainer
- CFPB — Understanding loan costs
Educational information only. Results are estimates produced from the assumptions you enter, and are not financial, tax, legal or medical advice. Check anything that matters against a qualified professional and the cited sources.