How this calculator works
Comparing loans by payment alone hides the cost of a longer term. This calculator runs both offers over the full term at monthly compounding, adds any upfront fee, and reports total cost so the offers are measured on the same basis. A lower rate on a longer term can still cost more in total. Fees are treated as paid upfront rather than financed; if a fee is added to the balance, enter the larger amount as the loan. Prepayment penalties, variable rates and fees paid to third parties are excluded.
Formula
For each offer, i = rate / 12 and A = P × i / (1 - (1 + i)^(-n)). Interest = n × A - P. Total cost = n × A + upfront fees. The cost difference is Offer A total minus Offer B total; a positive value means Offer B is cheaper.
Worked example
Borrowing $20,000 under Offer A at 6.5% over 60 months costs $391.32 a month and $3,479.38 of interest. Offer B at 5.9% over 84 months with a $400 fee costs $291.21 a month and $4,461.91 of interest. Offer A totals $23,479.38 and Offer B totals $24,861.91, so despite the lower rate Offer B costs $1,382.53 more over its longer term, while its monthly payment is $100.11 lower.
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Frequently asked questions
Why can the lower rate cost more?
Because the term is longer, interest accrues for more months. Rate decides the price per dollar borrowed per month; the term decides how many months you pay it.
Should I pick the cheaper total or the lower payment?
If you can afford the higher payment, the cheaper total usually wins. A lower payment can be worth something if cash flow is tight, but it is a choice you are paying for.
How are fees handled?
Upfront fees are added to the total cost of their own offer. They are not financed, so they do not attract interest here. If a lender rolls the fee into the balance, enter the financed amount instead.
What about variable rates?
Both offers are treated as fixed. A variable-rate loan needs an assumption about future rates, which this comparison does not make.