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APR Calculator

Calculate the Annual Percentage Rate (APR) of a loan including fees and interest. Compare the true cost of borrowing.

What is APR Calculator?

The APR Calculator finds the true Annual Percentage Rate of a loan by factoring in both the interest rate and any upfront fees or points. APR gives you a single number that reflects the real cost of borrowing, making it easier to compare offers from different lenders.

How to use

  1. 1 Enter the loan amount you are borrowing.
  2. 2 Enter the nominal interest rate quoted by the lender.
  3. 3 Enter the loan term in months.
  4. 4 Enter any fees, points, or origination charges included in the loan.
  5. 5 The calculator displays the APR alongside the monthly payment, total interest, and total cost.

Formula

APR is the annual rate r such that the present value of all monthly payments equals the loan amount minus fees. Solved iteratively: PV = PMT x (1 - (1+r/12)^-n) / (r/12) = Loan - Fees.

Example calculation

A $20,000 loan at 6% for 60 months with $500 in fees has a monthly payment of $386.66. The APR works out to approximately 6.47% — higher than the nominal rate because the fees effectively reduce the amount you receive.

Frequently asked questions

What is the difference between APR and interest rate?

The interest rate is the cost of borrowing the principal. APR includes the interest rate plus fees, expressed as a single annual percentage. APR is always equal to or higher than the interest rate.

Why do lenders advertise the interest rate instead of APR?

The interest rate is always a lower number, which looks more attractive. Lenders are required by law (Truth in Lending Act in the US) to disclose the APR, so always compare APRs when shopping for loans.

Does a higher APR always mean a worse loan?

Generally yes, but consider the full picture. A loan with a slightly higher APR but lower monthly payments might suit your cash flow better. Also, some fees are optional, so ask the lender which fees are included.

How do mortgage points affect APR?

Paying points (prepaid interest) upfront lowers your interest rate but increases your APR in the short term. If you keep the mortgage long enough, paying points can save money overall. The APR calculation helps you see the break-even.

Can I use APR to compare a mortgage with a personal loan?

APR is the standard comparison metric across loan types, but be aware that mortgages include certain fees in the APR calculation that personal loans do not. Always confirm which fees are included in each APR figure.