APR Calculator

Calculate the true Annual Percentage Rate (APR) of a loan including all fees and costs. Compare the stated interest rate to the effective rate you actually pay.

Loan Details

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%
$
yrs

Enter your loan details and click "Calculate" to find the true APR.

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Pro Tip

When comparing loan offers, request the Loan Estimate form from each lender. This standardized document shows both the interest rate and APR, making it easy to compare the true cost of different offers.

Try the Mortgage APR Calculator →

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Understanding APR

The Annual Percentage Rate (APR) represents the true cost of borrowing money, expressed as a yearly rate. Unlike the stated interest rate, APR includes additional costs such as origination fees, discount points, and other charges that are part of the loan.

APR is always equal to or higher than the stated interest rate because it accounts for fees. The bigger the difference between APR and the stated rate, the more fees are being charged. This makes APR an excellent tool for comparing loan offers from different lenders.

The Truth in Lending Act (TILA) requires lenders to disclose the APR to borrowers, making it easier to compare the true cost of different loan offers. However, keep in mind that APR assumes you keep the loan for its full term. If you pay off the loan early, the effective rate will be higher because the upfront fees are spread over fewer years.

When comparing loans, look at both the APR and the monthly payment. Two loans with the same APR could have different monthly payments if one has higher fees and a lower rate, or vice versa.

APR Calculation Method

APR is the rate (r) where: Loan − Fees = M × [(1+r)n − 1] / [r × (1+r)n]

Where:

M = Monthly payment (based on stated rate)

r = Monthly APR rate (solved iteratively)

n = Total number of monthly payments

Fees = Total upfront loan fees and costs

Example

$200,000 loan at 6.5% stated rate with $4,000 in fees for 30 years:

  • • Monthly payment: $1,264.14 (based on stated 6.5% rate)
  • • Effective loan amount: $200,000 - $4,000 = $196,000
  • • APR solved iteratively: ~6.68%
  • • APR is 0.18% higher than stated rate due to fees

Frequently Asked Questions

What is the difference between interest rate and APR?
The interest rate is the cost of borrowing the principal loan amount. APR includes the interest rate plus other costs like origination fees, discount points, and closing costs, giving you a more complete picture of the loan's cost.
Why is APR important when comparing loans?
APR levels the playing field between different loan offers. A loan with a lower rate but higher fees may have a higher APR than a loan with a slightly higher rate and lower fees. APR helps you see which loan is truly cheaper.
Is a lower APR always better?
Generally yes, but consider the loan term too. A 15-year loan with a higher APR than a 30-year loan will still cost less in total interest. Also, if you plan to pay off the loan early, a lower rate with higher fees may not be better than a slightly higher rate with lower fees.
Does APR include all loan costs?
APR includes most lender fees but typically excludes some costs like title insurance, appraisal fees, and attorney fees. The exact inclusions can vary, so always read the fine print.