1. What is Interest Rate Difference?

The interest rate difference calculates the gap between two loan interest rates, helping borrowers compare loan options and understand potential savings.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Loan\ Rate1 \) — First interest rate in percentage
• \( Loan\ Rate2 \) — Second interest rate in percentage

Explanation: The result shows how much higher or lower Rate1 is compared to Rate2.

3. Importance of Rate Comparison

Details: Comparing interest rates helps borrowers make informed decisions, potentially saving thousands over the life of a loan.

4. Using the Calculator

Tips: Enter both interest rates as percentages. Positive results mean Rate1 is higher, negative means Rate1 is lower.

5. Frequently Asked Questions (FAQ)

Q1: Why compare interest rates?
A: Even small rate differences can significantly impact total loan costs over time.

Q2: What's considered a significant rate difference?
A: For mortgages, 0.25% can be significant. For other loans, 0.5-1% differences are usually meaningful.

Q3: Should I always choose the lower rate?
A: Not necessarily - consider other factors like loan terms, fees, and prepayment penalties.

Q4: How does rate difference affect monthly payments?
A: A 1% difference on a $200,000 30-year mortgage changes payments by about $120/month.

Q5: Are advertised rates always available?
A: Not always - final rates depend on credit score, down payment, and other factors.