Two loan offers are rarely easy to compare: a lower rate might come with a longer term or upfront fees that wipe out the saving. This calculator puts Loan A and Loan B side by side — monthly payment, total interest, fees and total cost — and tells you which is genuinely cheaper. It suits anyone weighing personal loans, car finance or mortgage offers.
The most common mistake is comparing monthly payments alone. A longer term reduces the monthly figure but adds months of interest — the loan with the lower payment often ends up costing more overall. Similarly, a lower rate can be wiped out by a large arrangement fee. Total cost, which combines all interest payments with upfront fees, is the single number that represents what the loan actually costs you.
How it works
Each loan is amortised independently with the standard fixed-rate payment formula:
M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1)
where P is the amount borrowed, r is the monthly rate (annual rate ÷ 12 ÷ 100) and n is the number of months (years × 12). From the monthly payment M the tool derives:
- Total interest = (M × n) − P
- Total cost = total interest + upfront fees
It then compares the two total costs and flags the lower one as the cheaper deal. Ranking by total cost — not by rate or monthly payment — is what catches the cases where a longer term or fees quietly make the “lower rate” loan more expensive.
Example
| Loan A | Loan B | |
|---|---|---|
| Amount | £15,000 | £15,000 |
| Rate | 5.9% | 6.4% |
| Term | 5 years | 4 years |
| Fees | £300 | £0 |
| Monthly payment | ≈ £289 | ≈ £355 |
| Total interest | ≈ £2,346 | ≈ £2,030 |
| Total cost | ≈ £2,646 | ≈ £2,030 |
Loan B has the higher rate and bigger monthly payment, yet its shorter term and zero fee make it about £600 cheaper overall — the kind of result a rate comparison alone would miss.
The calculator is privacy-first — both loans are computed entirely in your browser and nothing leaves your device.
When to use this calculator
Personal loans. Banks and lenders routinely present offers with different rates, terms, and arrangement fees. Comparing by rate alone is misleading when the terms differ. Enter both offers to see the real total cost comparison.
Car finance. Dealer finance often carries a higher rate than a bank personal loan but a lower monthly payment because the term is longer. Total cost comparison makes this trade-off explicit.
Mortgage remortgaging. When comparing a product-transfer offer against the open market, the rate differential is usually small but the term and fee differences can be significant. This calculator surfaces those differences clearly.
Common edge cases
Zero-interest promotions. When the rate is 0%, the monthly payment is simply the principal divided by the number of months, and total interest is zero. Only upfront fees (if any) contribute to the total cost of the loan.
Same amount, different term. Even with an identical rate, a three-year loan costs significantly less in total interest than a five-year loan — you pay for fewer months. The monthly payment is higher, but the total cost is lower.
Same term, different fees. A loan with a 0.5% lower rate but a £500 arrangement fee is not automatically cheaper. At short terms the fee can outweigh the interest saving. Enter both into the calculator to find the crossover point.