What a loan really costs
The monthly payment is only half the story. A longer term lowers the payment but raises the total interest, sometimes by thousands of dollars. Compare the total cost, not just the monthly figure.
Payment = P × r ÷ (1 − (1 + r)−n)
Here r is the APR divided by 12 and n is the term in months. Upfront fees don't change the payment, but they do add to what you pay overall.
Frequently asked questions
What is the difference between APR and interest rate?
APR includes certain fees on top of the interest rate, so it shows the yearly cost of borrowing more accurately. When comparing offers, compare APRs.
Is a 72-month car loan a bad idea?
Not always, but you pay more interest and may owe more than the car is worth for longer. Try 48, 60 and 72 months above to see the difference.
Can I pay off a loan early?
Most personal and auto loans allow early payoff without a penalty. Check your agreement for prepayment terms.