# Loan comparison: which costs less?

Compares two loan offers for the same amount: the monthly payment, the interest and fees over the years you keep the loan, the APR with fees, and which one costs less.

- Page: https://www.acalculator.org/finance/loan-comparison-calculator
- JSON spec: https://www.acalculator.org/finance/loan-comparison-calculator.json
- Version: 35deb1907cbb

## Default answer

Example with the default inputs (Amount to borrow $20,000.00, Loan A rate 7%, Loan A term (years) 5, Loan A fees $0.00, Loan B rate 6.5%, Loan B term (years) 5, Loan B fees $400.00): Loan A costs $117.94 less over 60 months: $3,761.44 for loan A against $3,879.38 for loan B.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| amount | Amount to borrow | The amount borrowed with either loan. |
| ratea | Loan A rate | The fixed yearly interest rate of loan A. The monthly rate is this ÷ 12. |
| yearsa | Loan A term (years) | The length of loan A in years; 2.5 is 30 months. |
| feesa | Loan A fees | Origination and other fees for loan A, paid when the loan starts. |
| rateb | Loan B rate | The fixed yearly interest rate of loan B. The monthly rate is this ÷ 12. |
| yearsb | Loan B term (years) | The length of loan B in years; 2.5 is 30 months. |
| feesb | Loan B fees | Origination and other fees for loan B, paid when the loan starts. |
| keep | Years you keep the loan | Compare the cost over this many years, for example until you plan to pay off or refinance. Leave empty for each loan’s full term. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| saving | The cheaper loan saves | The difference between the two costs. |
| best | Cheaper loan | The loan with the lower interest plus fees. |
| paymentA | Loan A monthly payment | Amount × r ÷ (1 − (1 + r)^−n), r = rate ÷ 12, n = months. |
| paymentB | Loan B monthly payment | Amount × r ÷ (1 − (1 + r)^−n), r = rate ÷ 12, n = months. |
| costA | Loan A cost | Up-front fees + interest paid over the years kept. |
| costB | Loan B cost | Up-front fees + interest paid over the years kept. |
| interestA | Loan A interest | Interest paid over the years kept. |
| interestB | Loan B interest | Interest paid over the years kept. |
| aprA | Loan A APR | The yearly rate with the up-front fees counted (Regulation Z). |
| aprB | Loan B APR | The yearly rate with the up-front fees counted (Regulation Z). |
| balanceA | Loan A balance left | What you still owe on loan A when you stop comparing. |
| balanceB | Loan B balance left | What you still owe on loan B when you stop comparing. |
| months | Months compared | The months the costs cover. |

## Method

For each loan: payment = L × r ÷ (1 − (1 + r)^−n), r = rate ÷ 1200, n = years × 12; cost = fees + interest paid in the months kept; APR = 1200 × j where the payments at monthly rate j are worth L − fees.

## Assumptions

- Both loans are for the same amount, at a fixed rate, with monthly payments at the end of each month.
- Fees are paid when the loan starts; they are not added to the loan.
- The cost over the years kept counts interest and fees, not the principal you repay.
- No prepayment penalties. Type the rates you are offered; no live rates.

## Worked examples

1. amount = $20,000.00, ratea = 7%, yearsa = 5, feesa = $0.00, rateb = 6.5%, yearsb = 5, feesb = $400.00 gives paymentA = $396.02, paymentB = $391.32, costA = $3,761.44, costB = $3,879.38, best = Loan A, aprB = 7.347284%. Source: Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026, Appendix J: annual percentage rate computations for closed-end credit transactions (actuarial method), https://www.consumerfinance.gov/rules-policy/regulations/1026/j/ (retrieved 2026-10-05); Consumer Financial Protection Bureau, What is the difference between a loan interest rate and the APR? https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/ (retrieved 2026-10-05).
2. amount = $20,000.00, ratea = 7%, yearsa = 5, feesa = $0.00, rateb = 6.5%, yearsb = 5, feesb = $400.00, keep = 2 gives costA = $2,330.39, costB = $2,559.64, balanceA = $12,825.82, months = 24. Source: Consumer Financial Protection Bureau, What is the difference between a loan interest rate and the APR? https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/ (retrieved 2026-10-05).
3. amount = $12,000.00, ratea = 0%, yearsa = 2, feesa = $0.00, rateb = 0%, yearsb = 4, feesb = $0.00 gives paymentA = $500.00, paymentB = $250.00, costA = $0.00, costB = $0.00, saving = $0.00, best = Neither: they cost the same.

## FAQ

### How do I compare two loan offers?

Compare what each costs over the time you will keep it: the up-front fees plus the interest you pay. A lower rate with a fee can cost more than a higher rate without one, especially if you pay the loan off early.

### Why is the APR higher than the interest rate?

The APR counts the fees as well as the interest. It is the yearly rate at which the payments repay the amount borrowed minus the fees, worked out with the actuarial method of Regulation Z.

### Should I just pick the lower monthly payment?

Not always. A longer term lowers the payment but usually adds interest. Two 0% loans of $12,000 over 2 and 4 years cost nothing, but the payments are $500 and $250.

### What does "years you keep the loan" do?

It limits the comparison to that many years, for example until you plan to refinance or pay off. The cost then counts only the interest paid so far, and the balance left shows what you still owe.

### Are fees added to the loan?

No. The calculator treats fees as paid when the loan starts. If a lender adds them to the balance, type the larger amount and no fee.

### Does the calculator use today’s rates?

No. Type the rates and fees from each offer’s disclosure; the site shows no live rates.

## Sources

- Consumer Financial Protection Bureau, What is the difference between a loan interest rate and the APR? https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/ (retrieved 2026-10-05)
- Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026, Appendix J: annual percentage rate computations for closed-end credit transactions. https://www.consumerfinance.gov/rules-policy/regulations/1026/j/ (retrieved 2026-10-05)