APR Calculator
Calculate the true Annual Percentage Rate (APR) of any loan by including all fees and costs in the calculation.
Loan Details
Enter your loan information to calculate the true APR
Loan Fees & Costs
Enter all fees associated with the loan
1 point = 1% of loan amount
APR Analysis
The true annual cost of your loan
Loan Summary
Payment Summary
Fee Impact: The $6,000 in fees adds 0.235% to your effective rate, costing you an extra $17/month on average over the 360-month term.
What is APR?
APR (Annual Percentage Rate) represents the true yearly cost of borrowing money, expressed as a percentage. Unlike the simple interest rate, APR includes most fees and costs associated with the loan, making it a more accurate measure for comparing different loan offers.
APR Formula
APR = ((Fees + Total Interest) / Principal / Term) × 365 × 100Example:
Loan Amount: $10,000
Interest Rate: 8%
Origination Fee: 3% ($300)
Term: 3 years
Simple Rate: 8.00% → APR: ~9.26%
APR vs Interest Rate
Interest Rate
The basic cost of borrowing the principal amount. This is what lenders use to calculate your monthly payment.
- Purpose: Calculate payment amount
- Includes: Only interest charges
- Excludes: Fees and other costs
- Use: Determine monthly payment
APR
The total annual cost of the loan including interest and most fees, spread over the loan term.
- Purpose: Compare total loan cost
- Includes: Interest + origination fees + points
- Excludes: Some third-party fees
- Use: Compare loan offers fairly
What's Included in APR?
Typically Included
- ✓ Interest charges
- ✓ Origination fees
- ✓ Discount points
- ✓ Mortgage broker fees
- ✓ Closing costs (most lender fees)
- ✓ Prepaid interest
- ✓ Private mortgage insurance (PMI) - first year
Typically Excluded
- ✗ Title insurance
- ✗ Appraisal fees
- ✗ Credit report fees
- ✗ Home inspection
- ✗ Recording fees
- ✗ Property taxes
- ✗ Homeowners insurance
APR by Loan Type
Mortgages
APR typically 0.1-0.5% higher than rate. Includes points and most closing costs. Required by law to be disclosed.
Auto Loans
APR often very close to interest rate. May include documentation and acquisition fees. Watch for dealer markup.
Personal Loans
APR can be significantly higher (1-8%+) if origination fees are charged. Some lenders quote APR directly.
Credit Cards
APR equals interest rate for purchases. Different APRs for cash advances and balance transfers.
When to Use APR for Comparison
APR is Most Useful When:
- • Comparing loans with different fee structures
- • Evaluating mortgage offers from different lenders
- • Deciding between points vs. no points
- • Planning to keep the loan full term
APR May Be Misleading When:
- • Planning to refinance or sell early
- • Comparing adjustable vs. fixed rates
- • Loans have very different terms
- • One loan has variable rate
Related Interest Rate Terms
Nominal Rate
The stated annual interest rate without compounding. Also called the "stated rate" or "quoted rate."
EAR / APY
Effective Annual Rate or Annual Percentage Yield. Includes the effect of compounding over the year.
Periodic Rate
The interest rate charged each period (usually monthly). Equal to annual rate divided by number of periods.
Frequently Asked Questions
Why is my APR higher than my interest rate?
APR includes fees and costs that are spread over the loan term. Origination fees, discount points, and other lender charges increase the true cost of borrowing, which is reflected in the higher APR.
Should I always choose the lowest APR?
Not always. APR assumes you keep the loan for its full term. If you plan to sell or refinance within a few years, a loan with lower upfront fees might cost less overall, even with a slightly higher APR.
Why do lenders show both rate and APR?
The Truth in Lending Act (TILA) requires lenders to disclose APR so consumers can compare loans fairly. The interest rate determines your payment; the APR shows total cost including fees.
Can APR be lower than interest rate?
Rarely. This could happen if a lender offers rebates or credits that offset their fees, but it's unusual. If you see this, review the loan terms carefully for hidden costs.
How do discount points affect APR?
Discount points are prepaid interest that lowers your rate. They increase APR because you're paying upfront. The break-even point depends on how long you keep the loan—typically 4-7 years.