For a new loan, compare all scheduled payments and separately paid required charges with the money received, counting each fee once. For a decision made after payments have begun, separately compare only the future cash flows each option changes. Past payments and a nonrefundable fee already incurred are not new savings from replacing a loan. A dated payoff quote and the actual contract are essential.
Which costs belong to the decision you are making today?
Lifetime cost records what borrowing has cost since funding, including past charges. A remaining-cost comparison asks what you would pay from a stated decision date forward. Both are useful, but combining them can count a sunk charge twice or present past payments as avoidable.
For the model below, assume $12,000 original principal, an 18% fixed annual note rate, 48 equal monthly installments and 12 payments already made. A hypothetical $600 original fee was withheld at funding and is nonrefundable under this assumed contract. It remains part of original lifetime cost, but both keep and replace paths have already incurred it. No actual refund or prepayment rule is asserted.
What remains after the twelfth payment?
The original modeled monthly payment is $352.50. After 12 on-time equal-period payments, principal is $9,750.39. Keeping the loan requires 36 further payments totaling $12,690.00. In this model the replacement funds exactly that principal immediately after payment 12; no extra daily interest or prepayment charge is assumed. Real payoff quotes can include those amounts.
| Path | Annual note rate | New fee within principal | Starting principal | Monthly payment | Months left | Future repayment | Difference vs keeping |
|---|---|---|---|---|---|---|---|
| Keep the current modeled loan | 18% | $0.00 | $9,750.39 | $352.50 | 36 | $12,690.00 | $0.00 |
| Replace at 0% withheld fee | 12% | $0.00 | $9,750.39 | $323.85 | 36 | $11,658.69 | -$1,031.31 |
| Replace at 3% withheld fee | 12% | $301.56 | $10,051.95 | $333.87 | 36 | $12,019.27 | -$670.73 |
| Replace at 6% withheld fee | 12% | $622.37 | $10,372.76 | $344.52 | 36 | $12,402.86 | -$287.14 |
A negative difference means fewer future dollars in this invented model. It does not include the 12 payments already made or add the old $600 fee again. New withheld fees increase replacement principal and are already inside its future repayment. Actual fees, APR, eligibility and payment timing may change the result.
The payoff balance is not reduced by the old $600 fee in this comparison. Any principal still owed remains in the payoff amount, including debt that financed that charge. The rule is to avoid adding the old charge again or treating it as a new refund; it is not permission to subtract it from the existing debt.
How do you reproduce the remaining-cost example?
Calculate the original payment using M=P*r/(1-(1+r)^(-n)), where r=annual note rate/1200. After each of 12 payments, apply monthly interest to the opening balance and subtract M-interest from principal. Remaining repayment is M*36. For each replacement, use new principal=payoff/(1-new fee fraction) and calculate 36 new payments at 12% note interest. Subtract the keep-path repayment from the replacement repayment.
For a real comparison, use the actual dated payoff amount, fees paid separately, any refund tied to payoff, and the complete new schedule. The CFPB fee guidance supports reviewing disclosures; it does not confirm that the hypothetical rates or fee treatment here are available.
What should be compared before replacing the existing loan?
- The payoff quote’s valid-through date and any per-day amount afterward.
- Any contract-specific prepayment charge or refund, without assuming either exists.
- New net proceeds sufficient to finish payoff, and the new fee counted once.
- The new required payment, total remaining dollars and final payment date.
- Payment overlap until payoff is confirmed and cash left for essential expenses.
The written-offer guide organizes current disclosures. The cash-flow stress test asks a different question: whether the payment remains sustainable. Lower future cost alone does not establish that replacing the loan is suitable.
What is the total cost of a personal loan?
Total scheduled repayment is the payment multiplied by the number of payments, plus required charges paid separately if they are not already included. In a fee-free model, total interest is scheduled repayment minus principal. Avoid adding the same financed or deducted fee twice.
| Case | Term | Payment | Scheduled repayment | Cash received | Repayment less cash received |
|---|---|---|---|---|---|
| No separate fee | 36 months | $346.65 | $12,479.52 | $10,000.00 | $2,479.52 |
| $500 deducted fee | 36 months | $346.65 | $12,479.52 | $9,500.00 | $2,979.52 |
| No separate fee | 60 months | $237.90 | $14,273.96 | $10,000.00 | $4,273.96 |
Can a smaller payment mean a higher total cost?
Yes. Extending this fee-free 15% example from 36 to 60 months lowers the payment by $108.75 but adds $1,794.44 to total repayment. The amount and annual rate are held constant so the term effect is visible.
Which costs are outside these examples?
Late or returned-payment charges, optional products, payment-date changes, and prepayment charges are not included. Whether they apply depends on the agreement and repayment behavior. Ask the lender for its disclosures and payoff terms.
How can you compare the complete repayment picture?
For these fixed-payment examples, M = P × r ÷ [1 − (1 + r)−n]. P is the loan principal, r is the annual rate divided by 12 and by 100, n is the number of monthly payments, and M is the monthly payment. At a zero rate, M = P ÷ n. Total repayment = M × n; total interest = total repayment − P.
Calculations retain full precision until display, then round to cents. Multiplying the displayed rounded payment can differ by a few cents from the displayed total. A lender may round each instalment and adjust the final payment. Fees, daily accrual, odd first periods, late payments, and prepayments can change actual results.
Source: CFPB explanation of interest rate and APR. BYL dollar examples are independently calculated illustrations, not rates quoted by that source.
Sources supporting this explanation
- CFPB: check actual installment-loan fees in required disclosures
- CFPB: compare interest rate with APR and applicable borrowing charges
Sources checked 2026-10-29. Examples are hypothetical BYL calculations or planning worksheets;they are not observed lender prices,offers or approval criteria.