Loan Comparison Calculator

It depends on your priorities. A lower rate reduces the cost of borrowing, while a shorter term means you pay off the debt faster and pay less total interest — but with higher monthly payments. Ideally, get both: the lowest rate with the shortest term you can afford. If you must choose, a shorter term usually saves more money overall because you pay less interest, even if the rate is slightly higher.

The loan term is the biggest factor. Even a small rate difference compounds over time. For example, a $20,000 loan at 6% for 60 months costs $3,200 in interest, while the same amount at 4.5% for 48 months costs only $1,880. The shorter term reduces total interest by nearly half, even though the rate difference is just 1.5%. Always compare total cost, not just the monthly payment.

The interest rate is the annual cost of borrowing the principal. The APR (Annual Percentage Rate) includes the interest rate plus fees like origination charges and closing costs, giving a more complete picture of the loan cost. When comparing offers, use APR for an apples-to-apples comparison. A loan with a lower interest rate but high fees may have a higher APR than one with a slightly higher rate and no fees.