Compare two loans or mortgage offers

Comparing loans by interest rate alone is misleading: an offer with a lower rate can cost more if it has an arrangement fee, upfront costs or compulsory insurance, and a lower payment usually means more years of interest. What matters is how much extra you pay in total, and up to when.

Enter the two offers with the same amount and the calculator gives the payment, the APR (the effective yearly cost with fees and insurance), the total cost, which offer is cheaper and, if you plan to repay early, which is cheaper up to that point. A chart shows the cumulative cost month by month and where the two curves cross. Everything runs in your browser.

Each offer is calculated as a constant-payment (amortising) loan. The cost of a loan is not the sum of the payments but what you pay above the principal: the interest, plus the arrangement fee and upfront costs, plus any monthly insurance.

The APR comes from finding the monthly rate that equates the money you actually receive (the amount minus upfront costs) with all the payments and insurance you will make; it is then annualised. That is why it includes fees and insurance, not just the nominal rate.

To see what happens if you repay early, the cost is added up month by month (interest and insurance, plus what was paid at the start) and compared at that horizon. When one offer has upfront costs and less interest afterwards, the two curves cross: that is the month from which it pays off.

What to compare in two loan offers

• **The APR, not the interest rate**: the nominal rate leaves out fees, costs and insurance; the APR includes them. For the same term, the offer with the lower APR is cheaper.
• **The total cost**: interest plus fees, costs and insurance. It is what you really pay above the principal.
• **The payment**: what you can afford every month. A lower payment usually comes from a longer term, with more interest.
• **The horizon**: if you will repay before the end, the cost up to that point matters, not the total.

How to read the break-even chart

Each offer’s line is its cumulative cost. An offer with an arrangement fee starts higher but climbs more slowly if its rate is lower. The point where the lines cross is when that offer starts to pay off. If you repay before that month, it will have cost you more.

Insurance and rate discounts

Many offers lower the rate in exchange for insurance, a card or a salary account. Enter the monthly cost of those products on the discounted offer; if you would take them out anyway you can leave them out, but compare honestly.

Common mistakes

• Comparing only the interest rate or only the payment.
• Forgetting one offer’s arrangement fee and upfront costs.
• Comparing offers with different terms as if they were equivalent.
• Not counting compulsory insurance or discounts.
• Ignoring that with a variable rate the payment will change.

Limits of this calculator

• It assumes a constant-payment loan at a fixed rate for the whole term; it does not model variable rates, an initial fixed period or payment holidays.
• It does not include early-repayment charges: if your contract has one, add it to the cost up to the horizon.
• The APR calculated is an approximation based on what you enter; the official one appears in the lender’s disclosure and may differ if it includes other items (such as taxes).
• It accepts terms of up to 50 years.

Notice

This is an estimate and is neither an offer nor financial advice. Always check the figures against the lender’s official documents.