APR Calculator
Calculate the Annual Percentage Rate (APR) for your loan including all fees and costs. Compare APR vs nominal interest rate to understand the true cost of borrowing.
Total amount you want to borrow
Stated annual interest rate
Origination, processing, and closing fees
How long to repay the loan
Accurate APR Calculation
Calculate true APR including all fees using industry-standard financial formulas for precise results.
Compare Loan Offers
See APR vs nominal rate side-by-side to understand the true cost impact of fees and make informed decisions.
100% Private
All calculations happen in your browser. Your loan information is never sent to any server.
How APR Is Calculated
What is APR?
APR (Annual Percentage Rate) represents the true annual cost of borrowing money, including both the interest rate and all fees. It's expressed as a yearly rate and allows you to compare different loan offers on an apples-to-apples basis.
How We Calculate APR
1. Calculate the monthly payment using the nominal interest rate on the full loan amount
2. Determine the effective principal by subtracting fees from the loan amount (this is what you actually receive)
3. Find the APR by calculating what interest rate would produce the same monthly payment when applied to the effective principal
4. The difference between APR and the nominal rate shows the true cost impact of fees
Example Calculation
Scenario: $100,000 loan at 5% interest for 30 years with $3,000 in fees
- • Loan Amount: $100,000
- • Nominal Rate: 5.00%
- • Fees: $3,000
- • You Receive: $97,000 (after fees)
- • Monthly Payment: $536.82 (based on $100,000 at 5%)
- • APR: ~5.31% (rate that produces $536.82 payment on $97,000)
- • True Cost Increase: 0.31% due to fees
Why APR Matters
Two loans with the same interest rate can have very different costs if one charges higher fees. APR accounts for this by showing the true annualized cost. Federal law requires lenders to disclose APR, making it a standard metric for loan comparison. Always compare loans using APR rather than just the interest rate to understand the real cost of borrowing.
Frequently Asked Questions
What is APR and how is it different from interest rate?
APR (Annual Percentage Rate) is the true cost of borrowing that includes both the interest rate and all fees. The nominal interest rate only reflects the cost of borrowing the principal, while APR accounts for origination fees, closing costs, and other charges, giving you a more accurate picture of total loan costs.
How do you calculate APR?
APR is calculated by determining what interest rate would produce the same monthly payment when applied to the loan principal minus fees. It uses the standard loan payment formula but accounts for upfront fees that reduce the effective amount you receive while maintaining the same payment schedule.
Why is APR higher than the interest rate?
APR is higher than the nominal interest rate because it includes all fees and costs associated with the loan. These fees effectively increase the cost of borrowing. The more fees charged, the higher the APR will be compared to the stated interest rate.
What fees are included in APR?
APR typically includes origination fees, processing fees, underwriting fees, closing costs, points, and other charges required to obtain the loan. It does not include late payment fees, prepayment penalties, or other optional fees.
Should I compare loans by interest rate or APR?
Always compare loans using APR, not just the interest rate. APR gives you the true cost of borrowing and makes it easier to compare different loan offers that may have different fee structures. A loan with a lower interest rate but higher fees might have a higher APR and cost more overall.
Is my data private when using this calculator?
Yes, absolutely! All calculations happen entirely in your browser. Your loan information is never sent to any server, ensuring complete privacy and security.