Loan Comparison Calculator

Why lifetime cost matters more than monthly payment

Two loan offers with similar monthly payments can differ substantially in total cost when rates or terms vary. A longer term usually lowers the monthly figure but raises total interest paid; a slightly higher rate on a shorter term can sometimes cost less overall. This calculator computes the same metric for both loans — monthly payment × number of months — and shows which option produces a lower total under the inputs entered. Whether the cheapest-on-paper option is the right one for any specific borrower depends on cashflow constraints, risk preference, and other factors not modelled here.

How to use it

Enter the principal, annual interest rate, and term in years for Loan 1, then do the same for Loan 2. The calculator returns the monthly payment for each loan under standard fixed-rate amortisation, the total repaid over each term, the total interest under each, and the absolute difference in lifetime cost. The currency selector at the top of the calculator changes formatting throughout — the math itself is currency-neutral, so the same ratios produce the same difference regardless of currency.

Worked example

Picture two offers on the same 20,000 principal: Loan 1 at 7% over 5 years; Loan 2 at 6% over 7 years (currency follows the selector). Loan 1's monthly payment is around 396.02, total repaid is 396.02 × 60 = 23,761.44. Loan 2's monthly payment is around 292.17, total repaid is 292.17 × 84 = 24,542.37. The difference is 780.93 — Loan 1 is cheaper over its life, even though Loan 2 has a lower headline rate. The longer term on Loan 2 outweighs the rate advantage. Push Loan 2's term down to 5 years at the same 6% and Loan 1's apparent advantage flips: Loan 2's monthly payment becomes 386.66 and total repaid 23,199.36, beating Loan 1 by 562.08.

How the math works

For each loan: monthly payment = L × r ÷ (1 − (1 + r)⁻ⁿ) where L is the principal, r is the monthly rate (annual ÷ 12 ÷ 100), and n is months. Total repaid = monthly payment × n. Total interest = total repaid − principal. Difference in lifetime cost = absolute value of (Loan 1 total − Loan 2 total). The model assumes fixed rates throughout, equal monthly payments, no fees, and no prepayment.

Where this calculator sits in the comparison process

It computes the same lifetime-cost metric for both loans on a like-for-like basis. It does not factor in arrangement or origination fees, points paid up front, lender insurance products, prepayment options, or rate changes during the term. For loans that differ in fee structure, a common practical workaround is to add the fees to the principal input — a 20,000 loan with a 500 origination fee can be modelled as a 20,500 loan, so the lifetime cost figure absorbs the fee. Variable-rate offers can be modelled at the current rate or at a stress-tested rate; the worst-case rate cap in the loan documents is the conservative figure to plug.

What this calculator doesn't capture

The model is intentionally narrow. Loan-by-loan differences in arrangement fees, points, insurance, prepayment penalties, or rate-reset behaviour can shift the comparison; tax treatment varies by country and product type and isn't modelled. The risk of a longer term (more months exposed to income shocks) and the cashflow benefit of a lower monthly payment are real factors that don't show up in a single lifetime-cost figure. Treat the difference as one input to the decision rather than the whole answer.