Comparing Loan Options
Not all loans are created equal. A loan with a lower monthly payment might actually cost you thousands of dollars more in the long run if the term is extended.
Use our loan calculators to compare different offers side-by-side. See how varying the interest rate or the loan term affects your total cost of borrowing.
Essential Calculators
Use these tools to run the numbers for this scenario.
Action Plan Checklist
- Always compare the APR (Annual Percentage Rate), not just the nominal interest rate.
- Look closely at the total interest paid over the life of the loan.
- Check for prepayment penalties if you plan to pay the loan off early.
- Calculate how much money you save by choosing a shorter loan term (e.g., 15-year vs 30-year).
Required Reading
Deep dive into the strategies behind this use case.
Key Terminology
Understand the financial and mathematical terms involved.
Worked Examples
Real-world scenarios with step-by-step calculations.
Finance
Buying a $400,000 Home with 20% Down
By putting 20% down, the buyer avoids Private Mortgage Insurance (PMI). However, over the 30-year term at a 6.5% interest rate, the buyer will actually pay more in interest ($408,144) than the original loan amount itself ($320,000).
View in Calculator →Frequently Asked Questions
Why is a 30-year loan more expensive overall?
Even though the monthly payment is lower, you are paying interest on the borrowed money for an extra 15 years compared to a 15-year loan.
Should I always choose the lowest monthly payment?
No. The lowest monthly payment usually means the longest loan term, which maximizes the total amount of interest you will pay to the bank.