Loan Comparison Calculator

What is the difference between APR and interest rate?

The interest rate is the cost of borrowing the principal, expressed as an annual percentage applied to the outstanding balance. APR (annual percentage rate) includes the interest rate plus most lender fees — origination, documentation, some third-party costs — amortized over the life of the loan. APR is always equal to or higher than the raw interest rate. For comparing loans apples-to-apples, APR is the more honest metric because a lender quoting a low rate with a 2 percent origination fee can end up costing more than a competitor with a higher rate and no fee. Federal law (Truth in Lending Act) requires APR disclosure on most consumer loans.

Does paying extra on my loan reduce interest?

Yes, materially. Extra principal payments reduce the outstanding balance immediately, which means next month's interest charge is smaller, and every future payment applies more to principal and less to interest. On a 25K USD auto loan at 8 percent over 60 months, adding 100 USD per month to principal pays it off in 47 months instead of 60 and saves roughly 580 USD in interest. The higher the rate and the longer the remaining term, the more dramatic the savings. Confirm with your servicer that extra payments apply to principal (not held as prepaid future interest) — most do this correctly but verifying on the next statement avoids surprises, and check for any prepayment penalty in the loan note before accelerating.

How is my credit score affected by taking a new loan?

In the short term, a hard inquiry drops your FICO score by 3 to 8 points for about 12 months. Opening a new account lowers your average account age, which also costs a few points. Once the loan reports with a positive payment history, your score usually recovers within 3 to 6 months and installment loans actually help your credit mix (a FICO factor worth roughly 10 percent of your score). A new installment loan next to existing credit card balances can even lower your revolving utilization, which helps. If you are rate-shopping for a mortgage, auto, or student loan, FICO treats multiple inquiries within 14 to 45 days as a single inquiry — so shop within a 2-week window to minimize score impact.

What is a good interest rate for a personal loan or auto loan?

Depends on credit score and loan type. For auto loans as of 2024, excellent credit (740+) typically lands 6 to 8 percent for new cars and 7 to 9 percent for used; fair credit (640-700) sees 10 to 15 percent. For unsecured personal loans: excellent credit 8 to 12 percent, good 12 to 18 percent, fair 18 to 30 percent. For student loan refinance: excellent credit 5 to 7 percent variable or 6 to 8 percent fixed. Rates are heavily influenced by the Fed funds rate environment — rates in 2021 were 2 to 4 percent lower across the board. Shop at least three lenders including a credit union, which typically undercuts banks by 0.5 to 1.5 percentage points.

Should I take a longer loan term for a lower monthly payment?

Rarely a good trade. A 72-month auto loan has a payment 15 to 20 percent lower than a 60-month loan but total interest 30 to 50 percent higher. An 84-month auto loan is borderline predatory — by the time the car depreciates (as used cars typically lose 60 percent of value in 5 years) you are underwater on the loan for most of the term. If the shorter-term payment is unaffordable, the honest answer is usually that you are buying too much car, not that you need a longer term. Exception: a lower-rate longer term (some lenders offer 1 to 2 percent discount for a 48-month term versus 60) can flip the total-cost math — always compare total interest, not monthly payment.