Loan Comparison
Compare multiple loan options side-by-side. Analyze interest rates, monthly payments & total costs to find the best deal. Make smarter borrowing decisions.
Loan Option A
Loan Option B
About Loan Comparison
Free Online Tool
Loan Comparison
Enter the loan amount, interest rate, and term for two loan offers — compare monthly repayments, total interest burden, and cost-per-dollar borrowed to identify which loan is genuinely cheaper across its full repayment period.
How to Use This Tool (30 Seconds)
- 1Enter Loan Amount for Both Offers: Input the principal amount for Loan A and Loan B. If comparing two offers for the same borrowing need, enter the same amount for both. If comparing loans for different purposes — a personal loan versus a credit line — enter the respective amounts you intend to draw.
- 2Enter Annual Interest Rate: Input the APR for each loan. The Annual Percentage Rate is the legally required disclosure figure in the US under Regulation Z — it includes interest plus mandatory fees expressed as an annualized rate. Never compare loans using nominal rates alone; APR is the standardized comparison metric mandated by the Truth in Lending Act.
- 3Enter Loan Term in Years: Input the repayment duration in years for each loan. Personal loans typically run 1–7 years. Auto loans run 3–7 years. Student loans run 10–25 years. The term is the single variable most borrowers underweight when comparing offers — small term differences produce large total interest variations.
- 4Read the Loan Comparison: The tool calculates monthly payment, total repayment, total interest, cost per dollar borrowed, and annual percentage of income consumed at a reference salary — giving you a complete picture of each loan's affordability and lifetime cost.
Loan Comparison Formulas — APR, Amortization and Cost Per Dollar
The tool uses the Truth in Lending Act (TILA) amortization model plus a cost-per-dollar metric that normalizes different loan amounts to the same comparison baseline:
// Standard loan amortization payment
r = APR ÷ 100 ÷ 12
n = termYears × 12
payment = P × r × (1+r)^n ÷ ((1+r)^n − 1)
// Total interest and repayment
totalRepayment = payment × n
totalInterest = totalRepayment − P
// Cost per dollar borrowed — normalizes loan size
costPerDollar = totalRepayment ÷ P
Excellent: < $1.10 | Good: $1.10–$1.25 | High: $1.25–$1.50 | Avoid: > $1.50
// Example: $10,000 at 8% for 3yr vs 12% for 5yr
Loan A: payment=$313 | totalInterest=$1,271 | costPerDollar=$1.127
Loan B: payment=$222 | totalInterest=$3,347 | costPerDollar=$1.335
Loan A saves $2,076 despite $91 higher monthly payment
The cost-per-dollar metric solves the cross-amount comparison problem. When Loan A and Loan B have different principal amounts, total interest figures are incomparable in absolute terms. Cost-per-dollar normalizes both — a score of $1.127 means you repay $1.127 for every dollar borrowed regardless of loan size. This metric is used by consumer finance researchers and the CFPB's financial education resources to compare loan value across different amounts and terms.
Personal Loan Rate Benchmarks — By Credit Score and Type
| Loan Type / Credit Score | Typical APR Range | Cost/Dollar (5yr) | Rating |
|---|---|---|---|
| Excellent credit (750+) | 6–10% | $1.16–$1.27 | Good |
| Good credit (700–749) | 10–15% | $1.27–$1.40 | Acceptable |
| Fair credit (650–699) | 15–22% | $1.40–$1.58 | High cost |
| Poor credit (below 650) | 22–36% | $1.58–$1.98 | Very high — avoid if possible |
| Auto loan (new vehicle) | 5–8% | $1.13–$1.22 | Good |
| Student loan (federal) | 5.5–7.5% | $1.15–$1.23 | Good |
APR ranges based on Federal Reserve Consumer Credit data (2024), LendingTree rate survey, and Bankrate personal loan benchmarks. Cost-per-dollar calculated at 5-year term using midpoint APR. Credit score tiers follow FICO scoring model classifications.
⚡ Pro Tip
Before accepting any loan offer, run the same loan amount through this tool at your current offered rate versus the rate you would qualify for with a 20-point credit score improvement. On a $25,000 personal loan over 5 years, the difference between 14% APR (fair credit) and 9% APR (good credit) is $3,540 in total interest. Spending 3–6 months paying down existing revolving debt to improve your score from 670 to 700 before applying reduces borrowing cost by more than the interest saved in most other financial decisions available to middle-income borrowers. Delay the loan; improve the score first.
Disclaimer: This tool is for informational purposes only and does not constitute financial or lending advice. APR calculations assume a fixed rate throughout the loan term. Actual loan costs vary based on credit score, lender fees, prepayment penalties, and loan type. Always obtain and compare official Loan Estimate documents from lenders before accepting any loan offer. Consult a certified financial planner for personalized debt management guidance.
Frequently Asked Questions
Q: What is the difference between APR and interest rate for loan comparison?
The interest rate is the base cost of borrowing the principal. APR adds origination fees, broker fees, and other mandatory costs to the interest rate and expresses the total as an annualized percentage. Federal law under Regulation Z requires lenders to disclose APR on all consumer loan offers. For accurate comparison between two lenders, always use APR — a lower interest rate with higher fees can produce a higher APR than a nominally higher rate with no fees.
Q: How do I compare loans with different principal amounts?
Use the cost-per-dollar metric — total repayment divided by principal. A $10,000 loan repaying $12,700 has a cost-per-dollar of $1.27. A $15,000 loan repaying $18,900 has a cost-per-dollar of $1.26. Despite the absolute interest difference, the $15,000 loan is marginally cheaper per dollar borrowed. This metric enables valid comparisons across different loan sizes.
Q: What is the maximum loan term I should consider for a personal loan?
Financial planners generally advise against personal loan terms beyond 5 years for non-asset-backed borrowing. Beyond 5 years, the cumulative interest typically exceeds 40–50% of the principal at standard personal loan rates — reaching cost-per-dollar scores above $1.50 which most consumer finance researchers classify as high-cost debt. For larger amounts requiring longer terms, secured loans against appreciating assets generally offer lower rates.
Q: Can I use this tool to compare a secured against an unsecured loan?
Yes — enter the APR and term for each. Secured loans (backed by collateral like a vehicle or home) typically carry APRs 3–8% lower than unsecured personal loans for the same borrower. The comparison will show the interest saving from securing the loan. Factor in that secured loans carry repossession risk if payments are missed — a non-financial consideration not captured in the tool.
Q: What is the effect of a prepayment penalty on loan comparison?
Prepayment penalties — charged when you pay off a loan early — are not included in the standard APR calculation for loans where early repayment is optional. If one loan offer includes a prepayment penalty and you plan to pay early, add the estimated penalty cost to that loan's total repayment before comparing. Prepayment penalties are increasingly rare on personal loans but common on auto loans and some mortgages.
Q: How does credit score affect the interest rate I am offered?
Lenders use credit score as the primary risk proxy for personal loan pricing. Moving from a 670 to a 720 FICO score typically reduces personal loan APR by 3–6 percentage points at major lenders. On a $20,000 loan over 5 years, a 5% APR reduction from 16% to 11% reduces total interest by $2,990 and monthly payment by $50. No investment in personal finance reliably returns more than improving credit score before a significant borrowing event.
Q: Is a lower monthly payment always better when comparing two loans?
Never — lower monthly payments almost always mean longer terms or higher rates, both of which increase total interest paid. The correct primary metric is total interest paid, not monthly payment. Monthly payment is only the relevant metric when you have a hard monthly budget constraint that one option violates. When both options are affordable, always choose the loan with lower total interest — the cost-per-dollar comparison in the tool makes this immediately visible.