Debt consolidation
No fee or a lower interest rate: which costs less?
Quick answer
A lower rate does not always mean a lower full cost. A fee can make you borrow more to pay the same debts. Compare loans for the same cash need and payoff date. Check the full cost, the offered APR, and the monthly bill.
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Keep the cash need the same
The example below sends $10,000 to creditors with either loan. Both last 36 months. The fee-bearing loan must start at a larger amount because part is taken out.
These are example fixed interest rates, not promised offers or disclosed APRs. The interest rate sets the payment in this model. A real offer’s APR also reflects certain fees. Check both the full cost and the payment before choosing.
Hold target cash and term constant
Scroll across to see all columns.
| Offer | Fixed interest rate | Deducted fee | Loan amount before fees | Total paid | Borrowing cost |
|---|---|---|---|---|---|
| No-fee offer | 12.00% | $0 | $10,000 | $11,957.15 | $1,957.15 |
| Lower-rate offer | 10.00% | 5.00% | $10,526.32 | $12,227.57 | $2,227.57 |
A lower interest rate can come with a larger loan
These are fixed interest rates, not APRs. APR includes interest and certain fees. The model uses monthly payments for 36 months and rounds results to cents. This is an example, not an offer. See the CFPB explanation of interest rate and APR. The label was corrected September 8, 2026; the math has not changed.
The cheaper result can change with rate, fee, and term
The lower rate costs $270.41 more in this example
The no-fee loan costs $1,957.15 to borrow. The lower-rate loan costs $2,227.57 because the fee requires a larger balance. Its monthly payment is $339.65, compared with $332.14 for the no-fee loan. The difference uses unrounded totals before rounding to cents.
A smaller fee or a bigger rate reduction could reverse the result. Early payoff can change it too: a fee already paid may not be refunded. Compare both offers again for your actual cash need, term, and expected payoff date.
Check the next part of your offer
Compare the same cash need in both offers
Enter the interest rate and fee separately. Check the offered APR too; the tool does not calculate APR.