Loan Comparison Calculator

Why there is no single best loan

Ask which of three offers is best and the honest answer is another question: best at what?

A seven-year loan at a lower rate with a 4% fee can simultaneously have the lowest monthly payment, the highest total cost, and the slowest payoff. A five-year loan at a slightly higher rate with no fee can be the cheapest overall while being the hardest to afford each month. Both statements are true and they point at different loans.

So this calculator refuses to declare one winner. It names the best offer on each measure and lets you pick the measure that binds for you — which is the actual decision.

The measures, and what each is for

Monthly payment. The constraint if cash flow is tight. It is also the number lenders lead with, because a longer term always improves it.

Total cost. Every payment plus every upfront fee. The honest measure of what borrowing costs you, and usually the one to weight most heavily.

Total interest. Total cost without the fees, useful for seeing whether a difference comes from the rate or from the charges.

APR. Rate and fees in one number, solved from the real cash flows. Fair when terms match and misleading when they do not.

Payoff time. How long you are committed for, which matters beyond the money.

The holding period changes the answer

Comparing over the full term assumes you keep each loan to the end. Many loans are repaid early — a car sold, a mortgage refinanced, a windfall arriving — and a loan with high upfront fees looks much worse when those fees are spread over three years instead of seven.

Enter a holding period and the calculator reports the net cost over it: everything paid, less the principal actually paid down. That last subtraction matters, because a loan that amortizes faster should not be penalised for the cash it puts into equity.

A worked example

$32,000 from three lenders: a bank at 7.4% over five years with a 1% fee; a credit union at 6.95% over five years with $150 of fees; and an online lender at 6.4% over seven years with a 4.5% fee.

The online lender has the lowest monthly payment by a wide margin — around $475 against $637 and $632 — because the term is two years longer. It also has the highest total cost, at roughly $41,300 against $38,500 and $38,100, because those two extra years of interest and a $1,440 fee both have to be paid.

The credit union wins on total cost and on APR. The bank is a close second. The online lender wins only on the monthly payment, and only because of the term — the lowest rate on the page belongs to the most expensive loan.

Set the holding period to four years and the ranking shifts again: the online lender still has a large balance outstanding at that point, so its net cost over the period looks better than its full-term total suggests.

Comparing loans of different terms

The cleanest way is to ask each lender for a quote at the same term. Most will oblige, and it removes the confound entirely — the difference then reflects rate and fees alone, which is what you were trying to compare.

If that is not possible, compare on total cost rather than payment or APR, and consider what you would do with the difference. Taking the longer loan and paying it as though it were the shorter one gives you the lower total with the option to fall back — as long as there is no prepayment penalty.

What this does not model

• Prepayment penalties. Rare on consumer loans and not universal; check before planning to overpay.
• Rate discounts. Autopay and relationship discounts are common and are worth asking about.
• Variable rates. All loans are treated as fixed.
• Whether you qualify. Advertised rates go to the strongest applicants.
• Servicing quality. Not a number, and it matters over seven years.

For the fee arithmetic behind the APR column, see the APR calculator.