Two Loan Offers Calculator

How it is calculated

The same loan amount is run through each offer's rate and term with the level-payment formula.

i = rate ÷ 100 ÷ 12, n = years × 12
payment = P × i ÷ (1 − (1 + i)−n)
total cost = payment × n
difference = total cost A − total cost B

P is the loan amount in dollars. A positive difference means offer A costs more over its full term; a negative one, shown with the sign before the dollar sign (-$50,341.14), means offer B does. At a 0% rate the payment is simply P ÷ n. The results list both monthly payments and the total cost of offer B, so offer A's total is the B total plus the difference. Each term must come to a whole number of months (4.25 years is fine, 4.1 is not) and be at most 100 years; the amount must be above zero and rates cannot be negative, or there is no result. Total cost means principal plus interest only: origination fees, insurance and points are not included, and APR is not calculated.

Common mistakes

• Choosing the offer with the lower payment without looking at the total cost. In this example A has the lower rate and lower payment but costs more overall because it runs a year longer.
• Reading the difference with the wrong sign. It is A minus B, so a positive number means A is the more expensive offer and a negative one means B is.
• Entering the term in months. Both term fields are in years; 48 entered for a 4-year loan is read as a 48-year loan with a payment of only $128.55 and a total of $74,046.01 for offer B.
• Typing a term that is not a whole number of months, such as 4.1 years. The tool shows no result; use 4.25 for 4 years 3 months, or whole years.
• Comparing offers that carry different fees. Fees are not modelled, so an offer with a lower rate but a large origination fee can still be more expensive; check the APR as well.