Which loan should I choose, one with the lowest monthly rate or one with the least interest paid?

It depends on your goals. A loan with the lowest monthly payment will ease your monthly budget while a loan with the least interest paid can save you the most money overall. A longer term will result in lower monthly payments but generally increase the total amount of interest paid. For this reason, these two goals often lead to different loan offers. This calculator shows both options simultaneously making it easier for you to decide.

What is a good interest rate for a personal loan?

Private loan interest rates generally range from about 6% for very creditworthy applicants to 36% for less creditworthy applicants, with the average being around thirteen percent. Because your interest rate will depend on your credit score and credit history, it is best to compare several offers in order to find a good rate that works for you.

Do longer loan terms actually cost more?

Almost always yes. The longer the term, the more the remaining balance of the loan is spread out over a larger number of payments, which reduces the amount of each individual payment but also increases the number of months that interest must be paid on. Unless the rates for short-term loans are significantly higher, short-term loans will result in lower overall costs despite having higher monthly payments.

What is the difference between interest rate and annual percentage rate (APR)?

The interest rate determines the monthly payment for the amount borrowed. The annual percentage rate (APR) also includes any initial fees and points, so it reflects the true cost of credit per year. When different lenders charge different fees, it's fairer to compare the APR or total cost of credit with a tool like this one rather than just focusing on the interest rate.

How does credit score affect these loans?

Your credit score is one of the most important factors that affect the terms offered by lenders. A higher score indicates less risk and can result in lower interest rates, which reduces both your monthly payment and the total amount of interest paid over time. If you have a low score, it may be worth improving your credit before taking out a loan to potentially save more money than just comparing offers.

Loan Comparison Calculator

Loan A

Loan amount

Interest rate (APR)

Loan term

Monthly payment

Loan B

Loan amount

Interest rate (APR)

Loan term

Monthly payment

Compare more

Include upfront fees and points

Fold each loan's origination fee or points into its true cost.

Add a third loan to compare

Line up a third offer side by side.

The verdict

You could save

Loan A

has the lowest total cost of borrowing, saving about $0 versus the priciest option compared.

Loan A

has the smallest monthly payment at about $313.36.

Potential savings

Lowest total cost of borrowing: $
Lowest monthly payment: $
Monthly payment gap: $

Side-by-side comparison

Every loan side by side: monthly payment, total interest, and total cost of borrowing (interest plus fees).
Loan	Amount ($)	Rate	Term	Monthly payment ($)	Total interest ($)	Total cost ($)
Loan A	10,000.00	8%	3 yr	313.36	1,281.09	1,281.09
Loan B	10,000.00	12%	3 yr	332.14	1,957.15	1,957.15

Cost breakdown

The loan comparison tool will show you several loan offers side by side so that you can see which has the lowest true cost. By entering the loan amount, interest rate and term for each loan, the tool calculates the monthly payment, total interest paid and the total cost of the loan for each option. It then shows you the loan with the lowest total cost and the loan with the lowest monthly payment. These two are usually not the same loan.

Why compare loans in this way?

Financial institutions often list interest rates and monthly payments so it's easy to pick the offer with the lowest monthly payment. This habit can be expensive. Loans with lower monthly payments usually have a longer term, which means you'll pay interest over a longer period of time and end up spending more money overall.

When you see multiple offers side by side, vague impressions turn into two clear numbers: how much you pay each month and the total cost of the loan. When you know both values, compromises become apparent and the decision becomes easier.

How to use this calculator:

Start with two loan offers. Enter for each loan the amount you want to borrow, the annual interest rate quoted by the financial institution and the term length in years or months. The monthly payment for each loan will be shown immediately.

If lenders charge processing fees or points, select the initial cost option. The calculator will factor in those costs into the total cost of the loan. If you want to compare more than two offers, add a third loan. Then the results area will show the lowest total cost and lowest monthly payment loans, if they are not the same loan, it will also say so.

Formula for calculating monthly instalments:

For each loan the standard formula for an amortization with equal installments is used. During the term of the credit the monthly installments remain constant. With each payment first the interest for this month are paid, and the rest is used to reduce the remaining credit amount.

M = P \cdot \frac{r\,(1 + r)^{n}}{(1 + r)^{n} - 1}

P is the loan principal, r is the monthly interest rate (annual interest rate divided by 12), and n is the number of monthly payments (number of years in the term multiplied by 12). The total interest paid is the sum of all payments minus the loan principal.

You borrow $10,000 at an annual interest rate of 12 percent (APR). For a three-year term, your monthly payment would be about $332.14 and the total amount you pay in interest is $1,957.15. If you stretch that same loan out to five years, your monthly payment falls to about $222.44 but the total amount of interest paid increases to $3,346.67. The longer term reduces your monthly payments by about $110 but increases the overall cost by about $1,390.

Term	Monthly payment	Total interest	Total paid
3 years	332.14	1,957.15	11,957.15
5 years	222.44	3,346.67	13,346.67

Interest rates, APRs and fees information:

Interest rates determine the monthly payment amount, but they are not all of the costs. Many loans also have origination fees and interest charges that come on top of the loan. These fees are due when you take out the loan and are usually deducted from the actual amount received. If a loan over $20,000 has a one percent fee added to it, that's $200 that you never see.

This is why even loans with seemingly low interest rates can become a less favorable transaction when fees are factored in. When the upfront costs option is enabled, the calculator compares loans based on the total cost of the loan. This means that interest and fees are added together so that a loan with a lower interest rate but very high fees may not appear as advantageous as it actually is. The annual percentage rate (APR) serves the same purpose by combining both interest and fees into one comparable number.

What term should you choose?

In general, you should choose the shortest term that you can comfortably handle. The shorter the term, the higher your monthly rate will be, but overall you'll pay significantly less interest. Financial institutions often offer their best rates for shorter terms as well. A longer term results in lower monthly payments, which can be helpful during times of financial strain, but this relief is offset by additional interest charges.

Interest rates are highly dependent on your creditworthiness. If you have good credit, you may be able to get an interest rate closer to the bottom end of what lenders offer, while poor credit can result in a rate closer to the top end. It's worth comparing offers from multiple lenders before making a decision.

This calculator is for general informational and planning purposes only, not financial advice. The actual loan terms, fees, and annual percentage rate (APR) may vary depending on the lender and your individual creditworthiness. Be sure to read the fine print and consult with a qualified professional before taking out any loans.

Frequently asked questions

Which loan should I choose, one with the lowest monthly rate or one with the least interest paid?: It depends on your goals. A loan with the lowest monthly payment will ease your monthly budget while a loan with the least interest paid can save you the most money overall. A longer term will result in lower monthly payments but generally increase the total amount of interest paid. For this reason, these two goals often lead to different loan offers. This calculator shows both options simultaneously making it easier for you to decide.
What is a good interest rate for a personal loan?: Private loan interest rates generally range from about 6% for very creditworthy applicants to 36% for less creditworthy applicants, with the average being around thirteen percent. Because your interest rate will depend on your credit score and credit history, it is best to compare several offers in order to find a good rate that works for you.
Do longer loan terms actually cost more?: Almost always yes. The longer the term, the more the remaining balance of the loan is spread out over a larger number of payments, which reduces the amount of each individual payment but also increases the number of months that interest must be paid on. Unless the rates for short-term loans are significantly higher, short-term loans will result in lower overall costs despite having higher monthly payments.
What is the difference between interest rate and annual percentage rate (APR)?: The interest rate determines the monthly payment for the amount borrowed. The annual percentage rate (APR) also includes any initial fees and points, so it reflects the true cost of credit per year. When different lenders charge different fees, it's fairer to compare the APR or total cost of credit with a tool like this one rather than just focusing on the interest rate.
How does credit score affect these loans?: Your credit score is one of the most important factors that affect the terms offered by lenders. A higher score indicates less risk and can result in lower interest rates, which reduces both your monthly payment and the total amount of interest paid over time. If you have a low score, it may be worth improving your credit before taking out a loan to potentially save more money than just comparing offers.

Related calculators

Loan Payment CalculatorCalculate a fixed loan payment from the amount, rate, and term, or solve for the term, loan amount, or rate. See total interest, an amortization schedule, and a balance chart.

Loan CalculatorWork out a loan payment, the amount you can borrow, the term, or the interest rate. Leave any one field blank and the calculator solves for it.

Auto Loan CalculatorEstimate your monthly car payment, the loan amount, sales tax, and total cost, or work backward from a budget to the car you can afford.

Business Loan CalculatorWork out the payment, the total cost and the real APR of a business loan, whether it is quoted as an interest rate, as add-on interest or as a factor rate. Includes origination and closing fees, daily and weekly repayment, interest-only and balloon structures, and a DSCR cash-flow check.

Boat Loan CalculatorEstimate your monthly boat payment, the loan amount, sales tax, and total cost, or work backward from a budget to the boat you can afford.

APR CalculatorCalculate the real APR of a loan or mortgage, including fees and points, with the monthly payment, total interest, and total cost of borrowing.

Disclaimer: This calculator is provided for general informational and educational purposes only. Our calculators are under active development, and results may be inaccurate, incomplete, or unsuitable for your situation. Always verify the figures independently and seek advice from a qualified professional before relying on them. We make no warranties and accept no liability for any loss or decision arising from use of this tool.

References

Bankrate: Loan Comparison Calculator
Personal loan comparison guidance: rates, terms, and fees.
Consumer Financial Protection Bureau: Loan estimates and APR
Regulator explainer on comparing loan costs and APR.