APR Calculator

About the APR Calculator

This APR (Annual Percentage Rate) calculator computes the true cost of a loan including the stated interest rate, origination fees, and other finance charges. Unlike the nominal interest rate, APR reflects the total cost of borrowing and is essential for comparing loan offers from different lenders.

APR is one of the most important numbers to consider when taking out a loan because it represents the true annual cost including fees. Lenders are required by the Truth in Lending Act to disclose the APR, making it easier for consumers to comparison shop across different loan products.

How to Use This Calculator

Enter the loan amount, stated interest rate, and loan term in years
Input the origination fee as a percentage of the loan and any other flat fees
Click calculate to see your monthly payment, total interest, and the effective APR that includes all fees

The Formula

The calculator first computes the monthly payment from the loan amount, rate, and term. It then iteratively solves for the APR by finding the rate where the net loan amount (after fees) equals the present value of all monthly payments. The APR will always be higher than the stated interest rate when fees are present.

M = P × [r(1+r)^n] / [(1+r)^n − 1] | APR solves: Net Loan = M × [1 − (1+APR/12)^(−n)] / (APR/12)

Frequently Asked Questions

What is the difference between APR and interest rate?

The interest rate is the annual cost of borrowing the principal, while APR includes the interest rate plus any additional fees such as origination fees, broker fees, and closing costs. APR gives you a more complete picture of the true cost of a loan.

Why is APR important when comparing loans?

Lenders may advertise a low interest rate but charge high fees, making the loan more expensive than it appears. APR standardizes the total cost so you can compare loans apples-to-apples. Federal law requires lenders to disclose the APR on consumer loans.

How does APR differ for credit cards versus loans?

Credit card APRs are typically variable and higher than loan APRs, often ranging from 15% to 25%. Unlike installment loans, credit cards charge interest only on the unpaid balance, and interest accrues daily. Many cards offer a grace period where no interest is charged if paid in full each month.

What is a 0% APR offer and how does it work?

A 0% APR offer is a promotional financing period where no interest is charged on purchases or balance transfers. These offers typically last 6 to 18 months. It is crucial to pay off the full balance before the promotional period ends, or interest will be charged on the remaining balance at the regular rate.

What fees are included in an APR calculation?

APR typically includes origination fees, discount points, processing fees, underwriting fees, and mortgage insurance premiums. It does not include fees that could vary by borrower, such as appraisal fees, title insurance, or credit report fees. Always review the loan estimate for a complete fee breakdown.