Loan Payment Comparison Calculator

Loan Payment Formulas:

\[ PMT1 = PV \times r1 / [1 - (1 + r1)^{-n}] \] \[ PMT2 = PV \times r2 / [1 - (1 + r2)^{-n}] \]

Principal Amount (PV):

USD

Interest Rate 1 (r1):

decimal

Interest Rate 2 (r2):

decimal

Loan Term (n):

months

Payment Option 1 (PMT1):

Payment Option 2 (PMT2):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Loan Payment Comparison?

The Loan Payment Comparison Calculator helps you compare monthly payments for different loan terms or interest rates. It's useful when deciding between different loan options or evaluating refinancing opportunities.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula for both options:

\[ PMT = PV \times r / [1 - (1 + r)^{-n}] \]

Where:

\( PMT \) — Monthly payment amount
\( PV \) — Principal loan amount
\( r \) — Monthly interest rate (annual rate ÷ 12)
\( n \) — Number of payments (loan term in months)

Explanation: The formula calculates the fixed monthly payment required to pay off a loan over its term, including interest.

3. Importance of Payment Comparison

Details: Comparing loan payments helps borrowers understand the financial impact of different interest rates and loan terms, enabling better financial decisions.

4. Using the Calculator

Tips: Enter the principal amount in USD, interest rates as decimals (e.g., 0.05 for 5%), and loan term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Should I use annual or monthly rate?
A: The calculator expects monthly interest rates. Divide your annual rate by 12 to get the monthly rate.

Q2: How accurate are these calculations?
A: The calculations are mathematically precise for fixed-rate loans. They don't account for variable rates or fees.

Q3: What's better - lower payment or shorter term?
A: Lower payments improve cash flow but may cost more in total interest. Shorter terms save interest but have higher payments.

Q4: Can I compare more than two options?
A: This calculator compares two options. For more comparisons, run multiple calculations.

Q5: Does this include taxes and insurance?
A: No, this calculates principal and interest only. Actual payments may include additional costs.