Loan Comparison Calculator
Compare up to 3 loan offers. Find the cheapest option including fees.
Loan Parameters
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How to Compare Loan Offers
When comparing loan offers, don't just look at the interest rate. A loan with lower rate but higher fees might cost more than one with higher rate but zero fees—especially for short-term loans.
The key metric is Total Cost of Borrowing = Total Interest Paid + Processing Fees + Other Charges. This calculator computes this for each offer and ranks them, so you know exactly which loan saves you the most money.
The Interest Rate Trap
A 0.25% difference in interest rate seems tiny, but on a large, long-term loan, it adds up to massive amounts:
| Loan Amount | Tenure | 0.25% Extra Costs |
|---|---|---|
| $100,000 | 20 years | ~$2,800 |
| $250,000 | 25 years | ~$9,200 |
| $500,000 | 30 years | ~$24,000 |
Moral: For long-term loans, negotiate even small rate reductions. 0.25% saved = thousands earned.
Key Concepts in Loan Comparison
Interest Rate
The annual cost of borrowing, expressed as a percentage. On reducing balance loans (most common), interest is calculated on outstanding principal, so you pay less interest as you repay.
Processing Fees
One-time fee charged by lender (0.5-2% of loan). Often negotiable! Ask for waiver or reduction—especially during festivals or if you have a competing offer.
Total Cost of Borrowing
The TRUE cost = Total Interest + All Fees. This single number tells you which loan is cheapest. Don't compare rate or fees alone—compare total cost.
Break-Even Point
When higher fees but lower rate: How long until interest savings offset extra fees? If your tenure exceeds break-even, the higher-fee loan wins.
Quick Decision Guide
| Loan Type | Typical Tenure | Priority |
|---|---|---|
| Home Loan | 15-30 years | Lower Rate > Lower Fees |
| Car Loan | 3-7 years | Compare Total Cost |
| Personal Loan | 1-5 years | Lower Fees Often Better |
| Education Loan | 5-15 years | Lower Rate > Lower Fees |
Calculator Features
Frequently Asked Questions
Should I choose lower interest rate or lower processing fees?
For long-term loans (15+ years like home loans), ALWAYS prioritize lower interest rate. A 0.25% difference in interest rate over 20 years can cost you more than any processing fee. For short-term loans (1-3 years like personal loans), processing fees matter more—a high fee may not be recovered by a slightly lower rate. Rule of thumb: Calculate total cost (Interest + Fees) for both options. The one with lower total cost wins, regardless of which component is higher.
What is processing fee and is it negotiable?
Processing fee is a one-time charge by the lender for processing your loan application. It typically ranges from 0.5% to 2% of the loan amount. YES, it's often negotiable! Banks have flexibility, especially for: (1) Existing customers with good track record, (2) High loan amounts, (3) Festival seasons or promotional periods, (4) When you mention a competitor's lower offer. Some banks offer 'zero processing fee' during promotions—but check if they've increased the interest rate to compensate.
What is the difference between flat rate and reducing rate?
Flat Rate: Interest is calculated on the ORIGINAL principal throughout the loan. If you borrow $100,000 at 10% flat for 5 years, you pay $10,000 interest every year = $50,000 total interest. Reducing Rate: Interest is calculated on the OUTSTANDING principal. As you pay EMIs, principal reduces, so interest reduces too. A 10% reducing rate results in much less total interest than 10% flat. Conversion: Flat rate ≈ Reducing rate × 1.8 to 2. So 10% flat ≈ 18-20% reducing. Always compare in the same format. Our calculator uses reducing rate (the standard).
What is break-even analysis in loan comparison?
Break-even analysis helps when one loan has higher fees but lower rate. It calculates how long it takes for the interest savings to offset the higher fees. Example: Loan A: 8% rate, $5,000 fees. Loan B: 8.5% rate, $0 fees. On a $200,000 loan, the 0.5% difference saves about $1,000/year. Break-even = $5,000 ÷ $1,000 = 5 years. If your loan tenure is longer than 5 years, Loan A is better despite higher fees. If shorter, Loan B wins.
How does loan tenure affect total interest?
Longer tenure = Lower EMI but MUCH higher total interest. Example on a $200,000 loan at 8%: 15-year tenure: EMI $1,911, Total Interest $144,026. 20-year tenure: EMI $1,672, Total Interest $201,357. 30-year tenure: EMI $1,467, Total Interest $328,310. The 30-year loan has 57% higher total interest than the 15-year! Choose the shortest tenure you can comfortably afford. Even prepaying 1-2 extra EMIs per year can save years and thousands in interest.
What fees should I consider besides processing fee?
Many hidden costs can add up: (1) Legal/Technical Fees ($200-500), (2) Stamp Duty (varies by state, can be 0.1-0.5% of loan), (3) Insurance (often bundled, compare standalone options), (4) Prepayment Penalty (typically 2-3% of outstanding, some banks waive for floating rate), (5) Rate Switch Fees (if converting from fixed to floating), (6) Annual Fees (some credit lines have this), (7) Documentation Charges. Get a complete fee breakdown from each lender before comparing.
Fixed rate vs floating rate: which is better?
Fixed Rate: Rate stays constant for entire tenure. Pros: Predictable EMI, protection if rates rise. Cons: Usually 1-2% higher than current floating rate, no benefit if rates fall. Floating Rate: Linked to bank's base rate (MCLR, repo rate). Pros: Lower initial rate, benefits if rates fall. Cons: EMI uncertainty, risk if rates rise. Rule: In a falling rate environment, choose floating. If rates are at historic lows and likely to rise, consider fixed. For home loans (15-30 years), floating is usually better as rates cycle up and down.
How do I know if a loan offer is competitive?
Benchmarks for competitive offers (2024): Home Loans: 8-9% is good, <8% is excellent. Personal Loans: 10-12% is good for salaried, 15%+ is expensive. Car Loans: 8-10% is competitive. Education Loans: 8-11% is standard. Always check: (1) Compare at least 3-4 lenders, (2) Check online aggregator rates, (3) Negotiate—banks have room, (4) Consider both banks and NBFCs, (5) Check your employer tie-ups (often get 0.25-0.5% discount).
Does credit score affect which loan offer is best?
Absolutely! Your credit score (FICO/CIBIL) determines: (1) Approval probability, (2) Interest rate offered, (3) Processing fee waived or not, (4) Loan amount sanctioned. A 750+ score can get 1-2% lower rate than a 650 score—on a $200,000 loan over 20 years, that's $20,000-40,000 difference! Before loan shopping, check your score (free on many sites) and dispute any errors. Even improving score by 50 points before applying can save thousands.
Should I take a loan from my bank or a new lender?
Existing bank advantages: (1) Faster processing (they have your data), (2) Possibly lower rate for 'relationship customers', (3) Easier approval for savings/salary account holders, (4) May waive processing fee. New lender advantages: (1) Often offer lower rates to acquire customers, (2) May have special promotions, (3) No relationship bias in assessment. Strategy: Get quotes from both your bank AND 2-3 competitors. Use competitor quotes to negotiate with your bank—they'll often match or beat to retain you.