Loan Comparison Calculator
Two offers, and the one with the smaller monthly payment is not automatically the cheaper one. Stretch a loan by three years and the payment falls while the total rises. This compares what each offer costs from the day you sign to the day it is cleared.
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The monthly payment is the wrong comparison
A longer term always produces a smaller payment, whatever the rate. That is arithmetic, not a better deal. Borrow 20,000 at 7.5% over five years and you pay about 4,050 in interest; take 6.2% over eight years and the payment drops by a fifth while the interest climbs past 5,600.
The number that decides which offer is cheaper is the total: every payment added together, plus the fees. That is what this compares.
Fees belong in the total
An arrangement fee is part of the price of borrowing. A lender can advertise a rate a fraction lower and take the difference back in a fee charged on day one. Where the fee is added to the balance rather than paid up front, you also pay interest on the fee for the life of the loan.
Compare the same term, then decide separately
If you want to know which lender is cheaper, set both to the same number of years. That isolates the rate and the fees. Choosing a longer term is a separate decision about what you can afford each month, and it should be made knowing what it costs.
Look at the annual percentage rate too
Most countries require lenders to publish a rate that folds in the compulsory fees, precisely so offers can be compared on one number. It is the fastest sanity check on the figures here: if one offer looks cheaper but carries the higher published rate, something has been left out of the inputs.
What this does not capture
Early repayment terms, whether the rate is fixed or variable, payment protection sold alongside, and what happens if you miss a payment. Two offers with the same total cost can still differ on all of those. Read the terms for the one the numbers favour rather than treating the total as the whole answer.
Frequently asked questions
Is the lower monthly payment always worse?
Not always, but it usually means a longer term. Set both offers to the same number of years to see whether the rate itself is better.
Should I include fees?
Yes. A fee is part of what borrowing costs, and lenders can trade a lower rate against a higher fee. Where the fee is added to the balance you pay interest on it too.
What if the offers have different terms?
Then you are comparing two different decisions at once. The total cost shown here is still correct, but it mixes the price of the loan with the length of it.
Why does the total differ from the amount plus interest?
Because the fees are in it. The total is every payment you will make plus anything charged separately.