How to Compare Two Loan Offers in Excel

Compare a car loan with a lower rate but a fee and longer term against a simpler offer, by total cost and true APR.

You will learn to

• Total the cost of borrowing including fees
• Pick the cheaper offer automatically
• Calculate the true APR when a fee is financed

How it works

The lowest headline rate is not always the cheapest loan. Compare offers by total cost of borrowing — every payment minus the amount you actually needed: =PMT(rate/12,months,-(amount+fee))*months-amount. A longer term or a fee rolled into the loan can make a lower rate cost more.

To see the true APR including a financed fee, ask RATE what interest rate links the money you actually received to the payments you will make: =RATE(months,-payment,amount)*12.

=PMT(C3/12,C4,-(C2+C5))*C4-C2