Financial
Compare loans with different durations: monthly payment vs total interest
Evaluate 36-, 48-, 60-, and 72-month loan offers side by side by contrasting lower monthly payments against total lifetime interest paid.
Compare monthly payments and total modeled interest
Dealerships and equipment lenders often pitch longer loan terms because stretching $30,000 at 6.0% nominal annual rate from 36 months to 72 months drops the monthly payment from $912.66 to $497.19.
However, Total Cash Paid equals -PMT(nominal annual rate/12, Months, Principal) * Months, and Total Interest Cost equals TotalPaid - Principal: stretching from 36 to 72 months surges total interest from $2,855.69 to $5,797.44 (+103% more interest!).
| Term Months ($30k @ 6% nominal annual rate) | Monthly Payment | Total Paid | Total Interest Cost |
|---|---|---|---|
| 36 months (3 yrs) | $912.66 | $32,855.69 | $2,855.69 |
| 48 months (4 yrs) | $704.55 | $33,818.44 | $3,818.44 |
| 60 months (5 yrs) | $579.98 | $34,799.04 | $4,799.04 |
| 72 months (6 yrs) | $497.19 | $35,797.44 | $5,797.44 |
Total lifetime interest and term-comparison formulas
Negate PMT (-PMT(...)) so loan cash outflows read as positive currency amounts.
=ROUND(-PMT($B$2 / 12, C2, $A$2) * C2 - $A$2, 2)Extra interest paid by choosing 72 months over 36 months
This computes the difference in modeled interest using unrounded monthly payments.
=ROUND((-PMT($B$2 / 12, D2, $A$2) * D2) - (-PMT($B$2 / 12, C2, $A$2) * C2), 2)Inputs and interpretation
Assume a fully amortizing loan, a fixed nominal annual rate compounded monthly, monthly payments at period end, and no fees, taxes or early payments. Total interest here uses the unrounded PMT; actual rounded payments and a final adjustment can differ. Longer terms increase total interest for this example, but do not universally double it.
Try the example
Use the original values or change them to test your understanding.