How Loan Terms Affect Borrowing Costs

A comparison of loans will help you see how factors such as interest rate and fee amounts affect how much your loan actually ends up costing you. Below is a sample scenario, or you can compare real terms from private loans using the Private Loan Comparison Tool on this page.

Let's say you're a freshman and you want to take a $10,000 loan with interest deferred until after you graduate, a total of 54 months, including a six-month after graduation grace period. The sample comparison below shows how different interest rates affect your overall cost. As with most private loans, the loan fees are added to the principal amount and the loan term is 10 years.

 Lender ALender B
 Loan amount: $10,000.00Loan amount: $10,000.00
Interest Rate10%12%
Total Fees (5 % of loan)$ 500.00$ 500.00
Loan Funds Disbursed$10,000.00$10,000.00
Total Amount Financed$10,500.00$10,500.00
Total Capitalized Interest$ 4,725.00$ 5,670.00
Total Repayment Amount$15,225.00$16,170.00
Monthly Payment$ 201.20$ 231.00
Additional Interest Cost (after repayment begins)$ 8,918.94$11,669.10
Total Cost of Loan$24,143.94$27,839.10

This sample comparison of Lenders C and D shows how different fee amounts affect your overall cost. Again, the loan fees are added to the principal amount and the loan term is 10 years.

 Lender CLender D
 Loan amount: $10,000.00Loan amount: $10,000.00
Interest Rate10%10%
Total Fees (5 % & 3% of loan)$ 500.00$ 300.00
Loan Funds Disbursed$10,000.00$10,000.00
Total Amount Financed$10,500.00$10,300.00
Total Capitalized Interest$ 4,725.00$ 4,635.00
Total Repayment Amount$15,225.00$14,935.00
Monthly Payment$ 201.20$ 197.37
Additional Interest Cost (after repayment begins)$ 8,918.94$ 8,749.06
Total Cost of Loan$24,143.94$23,684.06