Loan Comparison Calculator (Two Offers)

Comparing two loan offers by interest rate alone is a genuinely common mistake, and it's an understandable one — rate is the single number lenders advertise most prominently, and it feels like the natural point of comparison. But rate alone doesn't determine total cost; term length matters just as much, and the two interact in ways that can produce a counterintuitive winner.

The example built into this calculator illustrates the point directly: a 5-year loan at 7.9% costs more in total than a 6-year loan at 6.5%, on the identical loan amount, even though the 6-year loan spreads payments over more time. The lower rate more than compensates for the extra year of accruing interest, producing a genuinely lower total cost despite the longer term — exactly the kind of result a rate-only comparison would miss entirely, and exactly why running the real total-cost math matters more than eyeballing which rate looks smaller.

Monthly payment, meanwhile, is a different number worth tracking separately from total cost, since it answers a different question: not 'which loan costs less overall' but 'which loan fits my monthly budget.' It's entirely possible, and worth being aware of, that the loan with the lower total cost has a higher monthly payment than the alternative — in the example above, Offer A's shorter term produces a higher monthly payment despite its higher total cost, since the same (larger) total is being paid off over fewer months. Neither number alone tells the complete story; both matter, for different reasons, and a genuinely informed choice weighs both against your actual situation rather than optimizing for just one.

Beyond rate and term, real loan offers sometimes differ in ways this calculator's clean two-number comparison doesn't capture directly — origination fees, prepayment penalties, or other charges that affect the true cost of borrowing beyond the amortization math alone. When comparing real offers that differ in fee structure as well as rate and term, adjusting each offer's effective loan amount (or comparing net proceeds, as the Personal Loan Calculator does for origination fees specifically) gives a more complete picture than rate-and-term alone.

The genuinely reliable habit, whenever comparing loan offers, is running the actual total-cost numbers for each specific offer rather than trusting a quick mental comparison of headline rates — a habit this calculator is built to make fast and easy enough to actually do every time you're shopping for a loan, not just for a single big decision.