Loan Comparison Calculator: Which Offer Is Actually Cheaper?
Put two or three loan offers side by side and rank them by what they really cost — total interest plus every fee. The lowest advertised rate and the lowest monthly payment are often not the cheapest loan, and this shows you which one is.
Enter each offer exactly as the lender quoted it. Compare offers on the same amount and the same term — otherwise you are comparing different commitments, not different prices.
$400.76/month
$395.08/month · fee $600
Offer A costs the least to borrow — $4,046 in interest and fees. That is $259 cheaper than Offer B.
🚩 Offer B has the lowest monthly payment ($395.08) but is not the cheapest overall. Ranking by monthly payment here would cost you $259 more.
| Offer | Monthly | Total interest | Fees | Effective APR | Cost to borrow |
|---|---|---|---|---|---|
Offer Acheapest $20,000 · 7.5% · 5 yr | $400.76 | $4,046 | — | 7.50% | $4,046 |
Offer B $20,000 · 6.9% · 5 yr | $395.08 | $3,705 | $600 | 8.18% | $4,305 |
Cost to borrow = total interest + every fee, which is the figure to rank offers by. Effective APR is solved from the payments against the cash you actually receive (amount minus the fee), so a low headline rate with a large fee shows its real price. Assumes a fixed rate and a fully amortised loan with no early repayment. It excludes optional insurance, late fees, and early-repayment penalties — ask about those separately. This is general education, not financial advice. Everything runs in your browser; nothing you type is sent anywhere.
TL;DR
Rank loan offers by one number: cost to borrow = total interest + every fee, in currency, not percentages. Compare offers on the same amount and the same term or the comparison is meaningless. Two traps do most of the damage: a low headline rate paired with a large arrangement fee, and a low monthly payment that is only low because the term is longer. Both look like bargains and cost more.
When the lower rate is the more expensive loan
This is the case that catches people out, and it is the tool’s default example. Both offers are for $20,000 over 5 years. One quotes a visibly better rate.
| Offer | Rate | Fee | Interest | Cost to borrow |
|---|---|---|---|---|
| A — no fee | 7.5% | $0 | $4,046 | $4,046 |
| B — 3% fee | 6.9% | $600 | $3,705 | $4,305 |
Offer B’s rate is 0.6 points lower and it saves $341 in interest — but its $600 fee wipes that out and leaves you $259 worse off. Its effective APR, once the fee is counted against the cash you actually receive, is 8.18% versus A’s 7.50%. The offer that advertises the lower number is the more expensive loan.
The monthly payment is not the price
Salespeople quote monthly payments because a small monthly number feels affordable. But stretching the term lowers the payment while raising the total. Same $20,000 at the same 7.5%:
| Term | Monthly | Total interest | vs 3 years |
|---|---|---|---|
| 3 years | $622 | $2,396 | — |
| 5 years | $401 | $4,046 | +$1,650 |
| 7 years | $307 | $5,768 | +$3,372 |
The 7-year payment is half the 3-year payment, and costs $3,372 more. A lower monthly payment is a cash-flow decision, not a cheaper loan — decide it deliberately, not because a quote made it look like the better deal.
How to compare offers properly
- Fix the amount and term first. Ask every lender to quote the same figures so you are comparing prices, not products.
- Ask for the APR, not the rate. APR folds most compulsory fees into one annual figure. Any regulated lender in the US, UK, or EU can give you one; a seller who will not is telling you something.
- List every fee separately. Origination or arrangement fees, admin charges, compulsory insurance. Put each into the calculator above.
- Rank by cost to borrow. Total interest plus fees, in currency. This is the number that decides.
- Then check the escape routes. Early-repayment penalties, whether the rate is fixed or variable, and what happens if you miss a payment. These do not show up in any headline number.
One more habit worth building: read the pre-contract document every regulated lender must give you — the Truth in Lending disclosure in the US, or the pre-contractual credit information sheet in the UK and EU. The binding numbers live there, not in the advert. For a fuller walkthrough see our guide on how to compare loan offers and the 10-point loan comparison checklist.
Watch for “flat rate” quotes
This calculator assumes a normal reducing-balance loan, where interest is charged on what you still owe. Some lenders — common in vehicle and consumer finance in parts of Asia and in some dealer offers — quote a flat rateinstead, charging interest on the original amount for the whole term even as you pay it down. A flat rate understates the true cost badly: a 6% flat rate is roughly an 11% reducing-balance rate on a typical loan. If a quote says “flat” or carries no APR label, do not type it straight into the rate box — ask for the APR, or work out the monthly payment they are quoting and compare that instead. Our guide to APR vs flat rate vs reducing balance explains how to convert between them.
Frequently asked questions
How do I know which loan is actually cheaper?
Add the total interest you will pay over the life of the loan to every fee the lender charges, and compare that single currency figure across offers. Rates and monthly payments both hide things — a rate ignores fees, and a payment hides the term. Cost to borrow hides nothing, which is why it is the only ranking worth using.
Is a lower interest rate always better?
No. A lower rate with a large origination or arrangement fee can easily cost more than a higher rate with no fee, especially on smaller or shorter loans where there is less interest for the better rate to save. The shorter the loan, the more a fixed fee dominates. The worked example above shows a 6.9% loan beaten by a 7.5% one.
What is the difference between the interest rate and the APR?
The interest rate is what the lender charges on the balance. The APR is a broader figure that folds most compulsory fees in, so it reflects the true annual cost of the credit. That makes APR the fairer basis for comparison — but only when both quotes are APRs. Comparing one lender’s bare rate against another’s APR will mislead you every time.
Will I definitely get the advertised rate?
Often not. In the UK a lender only has to give the advertised representative APR to 51% of accepted applicants, so nearly half are quoted more. US and EU lenders price on risk in the same way. Treat any advertised rate as a best case and compare the personal quotes you are actually offered.
Does comparing loans hurt my credit score?
Getting quotes usually does not. UK and EU eligibility checks are soft searches that leave no mark. In the US, credit-scoring models treat multiple hard inquiries for the same kind of loan within a short shopping window as a single event, precisely so that shopping around is not penalised. Applying formally to many different lenders over a long period is what causes damage.
Can I compare loans with different terms?
You can, and the tool will warn you when you do, but understand what you are seeing. A 7-year loan will almost always show more total interest than a 3-year one at the same rate, so cost to borrow will rank it worse even if it suits your budget better. Different terms are different commitments — decide the term you want first, then compare prices at that term.
Borrowing soon? Read the free loan guide.
What sets your interest rate, how to compare lenders on total cost, and the fees to watch for — plain-English, no sign-up.