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B3.2 · Compare features and conditions of personal loans

Learn to compare features and conditions of personal loans through clear examples and targeted practice.

Ontario Grade 11 Mathematics

Saving, Investing, and Borrowing

MEL3E study topic B3.2 — comparing loan features and conditions

A personal loan can help someone pay for a large expense, such as a repair or essential equipment. But the amount borrowed is only one part of the decision. Offers can differ in interest rate, payment amount, repayment time, fees, and rules about paying early. Comparing these details helps a borrower understand what they agree to repay. In this lesson, a loan offer means the information a lender gives about a loan. A borrower is the person who receives and repays the loan. Use the lender’s stated payment amount and schedule for comparisons; do not assume that two offers with similar-looking rates have the same cost.

What you will learn

Identify common features and conditions shown in personal loan offers.
Use a calculator or spreadsheet to compare the total amount repaid and the cost of borrowing.
Explain how a loan’s conditions may suit one borrower better than another.

1. Read the offer before comparing

Start by finding the amount offered, also called the principal: the money the borrower receives before interest and fees. The interest rate is the lender’s stated charge for lending money. A lower rate can be helpful, but it does not by itself prove that an offer costs less overall.

Look for the repayment time, or term: how long the borrower has to repay the loan. Also note the payment amount and frequency, such as monthly or every two weeks. The payment schedule tells you when payments are due. A longer term may mean smaller scheduled payments, but the borrower may make more payments. Compare the total repaid, not just the size of one payment.

Check for fees, such as an application or administration fee. Find out whether a fee is paid up front or added to the amount owed. If the offer does not say, ask the lender rather than guessing. Also read the conditions: the rules attached to the loan. These may include requirements for a co-signer, who agrees to repay if the borrower does not, or a charge for paying the loan off early.

Record the principal, rate, term, payment amount, frequency, and fees.
Read the conditions as well as the headline rate.
Ask for clarification when a cost or rule is unclear.

2. Compare costs using repeated payments

The total of scheduled payments is found by adding the same payment once for each payment date. A calculator can multiply the payment by the number of payments when the amount stays the same. A spreadsheet can do the same calculation: enter the payment amount and number of payments in separate cells, then multiply the cells.

For a basic comparison, the cost above the amount borrowed is the total of scheduled payments minus the principal. Include fees that are not already included in those payments. Keep separate track of an up-front fee and a fee added to the balance so you do not count a fee twice. If a payment changes, add the payments in groups or one by one instead of multiplying one amount.

Compare offers for the same borrowing need. Check that the stated payment counts cover the full repayment period and note whether fees are included. If the offers use different payment frequencies or terms, write down the number of payments and the dates or intervals. This makes it easier to see what each total represents. A lender’s quote or calculator can provide the payment schedule; use its stated figures rather than trying to infer a payment from the interest rate alone.

\text{Cost above principal}=\text{total repaid}-\text{principal}

Total scheduled payments = payment amount multiplied by number of payments, when payments are equal.
Cost above principal includes relevant fees; do not count a fee twice.
A smaller payment does not automatically mean a cheaper loan.

3. Decide which conditions matter to the borrower

The lowest calculated cost is important, but a borrower also needs to know whether the payment schedule is manageable. A person paid monthly may prefer monthly due dates that fit their budget. Someone paid every two weeks may find that schedule easier to plan for. The borrower should check the dates and make sure money will be available when each payment is due.

Some offers may have a fixed rate, which stays the same for a stated period, or a variable rate, which can change. If the rate can change, ask how that could affect payments or the amount repaid. Do not treat today’s quoted payment as guaranteed for the full term unless the offer says it is. Other conditions, such as an early-payment charge or a co-signer requirement, may also affect whether an offer is suitable.

There is no single best offer for everyone. A useful comparison states both the cost and the conditions that matter. If important information is missing, the next step is to ask the lender for a clear written explanation before agreeing.

Consider affordability and payment timing, not only total cost.
Check whether the rate can change and what happens if it does.
A sound comparison explains trade-offs and identifies missing information.

A practical loan comparison checklist

Detail	Offer A	Offer B
Amount borrowed	Record the principal	Record the principal
Rate and whether it can change	Record the offer wording	Record the offer wording
Payment amount and frequency	Record both	Record both
Number of payments and term	Record both	Record both
Fees and early-payment rules	List each stated condition	List each stated condition
Total repaid and cost above principal	Calculate from the schedule	Calculate from the schedule

Worked example

Example 1: Compare two offers for the same amount

Jordan needs to borrow CAD 4,000. Offer A lists 24 monthly payments of CAD 190 and no separate fee. Offer B lists 30 monthly payments of CAD 160 and an up-front fee of CAD 80. Compare the stated costs, then note one condition Jordan should confirm.

Find Offer A’s payment total
Offer A has equal monthly payments. Multiply one payment by the number of payments to find the scheduled total.
$190\times24=\text{CAD }4{,}560$
Find Offer B’s payment total
Use the same method for Offer B. Add its up-front fee because that amount is not included in the listed payments.
$160\times30+80=\text{CAD }4{,}880$
Compare the costs above the amount borrowed
Subtract the principal from each total. This shows how much each offer costs beyond the CAD 4,000 received, including the stated fee.
$4{,}560-4{,}000=\text{CAD }560;\quad 4{,}880-4{,}000=\text{CAD }880$

Answer: Based on the stated payments and fee, Offer A costs CAD 560 above the principal and Offer B costs CAD 880. Offer A’s stated cost is CAD 320 lower. Jordan should confirm whether either offer has other fees or an early-payment charge.

Check: Offer B’s payments total CAD 4,800; adding CAD 80 gives CAD 4,880. Both totals include the full listed payment count.

Worked example

Example 2: Compare payment timing and a rate condition

Rina is considering a CAD 2,500 loan. Offer C lists 12 monthly payments of CAD 225, with a fixed rate for the full term and no stated fee. Offer D lists 26 payments every two weeks of CAD 105, with a variable rate and no stated fee. Compare the stated payment totals and identify what Rina should ask before choosing.

Calculate Offer C’s stated total
Offer C has 12 equal payments. Multiply the payment by 12 to total the listed payments.
$225\times12=\text{CAD }2{,}700$
Calculate Offer D’s stated total
Offer D lists 26 equal payments. Multiply the amount due every two weeks by 26. This totals the stated schedule, but the variable-rate condition still needs clarification.
$105\times26=\text{CAD }2{,}730$
Compare totals and conditions
Offer D’s stated total is CAD 30 higher. Rina should ask whether its payment amount or total could change when the variable rate changes, and confirm that no other fees apply. She should also check which due dates fit her budget.
$2{,}730-2{,}700=\text{CAD }30$

Answer: Offer C has the lower stated payment total by CAD 30 and a fixed rate for the full term. Offer D’s variable rate may change, so its stated total may not describe the final amount repaid. Rina needs the lender’s explanation of possible changes and any other conditions before comparing it fully.

Check: The calculations use the stated counts: 12 monthly payments for C and 26 every-two-week payments for D. The totals do not assume extra payments or unlisted fees.

Common mistakes and how to avoid them

Choosing the offer with the smallest payment without checking how many payments are required.

Correction: Multiply each payment by its full count, then include relevant fees.

Assuming that a quoted rate tells you the total cost.

Correction: Use the lender’s payment schedule and check the term, fees, and rate conditions.

Comparing totals while overlooking a variable rate or an early-payment charge.

Correction: List these conditions and ask how they could affect the borrower before deciding.

Lesson summary

Read the full offer: amount, rate, term, payment schedule, fees, and conditions.
Use a calculator or spreadsheet to total the stated payments and include relevant fees once.
Compare both cost and practical conditions, such as rate changes and payment timing.
Ask the lender to explain missing or unclear information before agreeing.

Check your understanding

Question 1

A loan offer lists 18 equal payments of CAD 140 and a separate fee of CAD 50. What is the total of the listed payments and fee?

CAD 2,470
CAD 2,520
CAD 2,570
CAD 2,590

Show answer and explanation

CAD 2,570

The payments total CAD 2,520 because 18 multiplied by 140 is 2,520. Add the separate CAD 50 fee to get CAD 2,570.

Question 2

Two offers have the same principal. One has a lower monthly payment but a longer term. What is the best next comparison?

Choose the lower payment without checking anything else.
Compare the total of all scheduled payments and relevant fees.
Assume the longer term always costs less.
Compare only the interest rates.

Show answer and explanation

Compare the total of all scheduled payments and relevant fees.

A smaller payment may be made more times. Total the full schedules and include relevant fees to compare stated costs.

Question 3

An offer says its rate is variable. What should the borrower do?

Assume the rate and payment can never change.
Ignore the rate because the first payment is known.
Ask the lender how a rate change could affect payments or the total repaid.
Treat the quoted total as certain without reading the conditions.

Show answer and explanation

Ask the lender how a rate change could affect payments or the total repaid.

A variable rate can change. The borrower should ask how the change may affect payments or the amount repaid.

Key terms

Borrower: The person who receives a loan and is responsible for repaying it.
Principal: The amount of money borrowed before interest and fees.
Interest rate: The stated rate used by the lender to describe the charge for borrowing.
Term: The agreed length of time for repaying the loan.
Condition: A rule or requirement attached to a loan offer.
Variable rate: An interest rate that can change under the loan’s terms.

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About this lesson

Published by DoAssignment. This AI-assisted lesson follows Ontario Grade 11 Mathematics (MEL3E), expectation B3.2. It is a study resource, not an official curriculum publication.

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