How to compare two loans: rate, CAT, term and fees
Compare two loans fairly using the rate, Mexico’s CAT, payment, term, fees, insurance and total repayment.
The smallest monthly payment is not necessarily the cheapest loan. It may reflect a longer term and therefore more interest, or omit fees and insurance.
Put both offers on the same basis
Collect the amount requested, net cash received, annual rate, official CAT, term, payment frequency, all-in payment, origination fee, insurance and prepayment rules. Compare the same principal and term whenever possible.
For example, at 24% over 36 months with no fee or insurance:
| Principal | Base payment | Estimated interest | Total payments |
|---|---|---|---|
| $50,000 | $1,961.64 | $20,619.14 | $70,619.14 |
| $100,000 | $3,923.29 | $41,238.27 | $141,238.27 |
At the same rate, repaying $50,000 over 24 months raises the payment to $2,643.55 but lowers interest to $13,445.32. Affordability and cost move in opposite directions.
Compare CAT and total repayment
Mexico’s CAT aims to annualize the broader cost of credit under defined assumptions; total repayment tells you how much cash leaves your pocket. Use both. A lower interest rate can still lose once fees, insurance and a longer term are included.
Worked comparison
| Item | Loan A | Loan B |
|---|---|---|
| Annual rate | 24% | 18% |
| Term | 24 months | 36 months |
| Origination fee | $0 | $1,000 |
| Monthly insurance | $0 | $150 |
| All-in monthly payment | $2,643.55 | $1,957.62 |
| Estimated interest | $13,445.32 | $15,074.31 |
| Total insurance | $0 | $5,400 |
| Total cost | $63,445.32 | $71,474.31 |
| Approx. CAT | 26.82% | 28.53% |
Loan B advertises a lower rate and has a smaller monthly payment, yet costs more because it lasts longer and adds both a fee and insurance.
Before signing
- Verify the amount you will actually receive.
- Confirm the all-in payment and total repayment.
- Review interest, fees, insurance and late charges.
- Check the official CAT and its assumptions.
- Ask whether early payments go to principal and whether a penalty applies.
Reproduce the offers in the loan calculator. For the Mexican disclosure metric, see CAT vs. interest rate; for upfront costs, see loan origination fees.
Frequently asked questions
Is a lower rate or lower CAT better?
CAT is broader, but neither figure replaces total repayment, net proceeds and contract terms.
Should I choose the lowest monthly payment?
Not automatically. A longer term can reduce the payment while increasing interest.
How do I compare different terms?
Compare total cost, CAT and duration, then model the same term to isolate rate and fee differences.