Look beyond a low monthly payment

Principal, interest, and fees

Principal is the amount borrowed that remains to repay. Interest is a charge for borrowing, and additional fees can change the total cost. An annual percentage rate, or APR, is designed to express borrowing costs on an annual basis, but definitions and included fees vary by product and jurisdiction.

Compare like with like

Ask for the amount you actually receive, total amount repayable, number and size of payments, rate type, fees, and early repayment terms. A smaller monthly payment can simply spread repayments over more months. Compare offers on the same amount and timeframe before drawing conclusions.

APR is not always the same as a quoted interest rate, and a rate divided by twelve may only be a modelling assumption. Real agreements can use daily interest, changing rates, or other conventions. Before signing, check whether a promotional rate expires and whether a missed payment changes charges. A calculator cannot replace the agreement or resolve legal questions about it.