APR Calculator

Two loans with the same interest rate can have very different true costs. APR (Annual Percentage Rate) includes fees and other charges so you can compare loans on a level playing field.

What Is APR?

APR is the annual cost of borrowing expressed as a percentage, including not just the interest rate but also lender fees, origination charges, and certain other costs. It gives a more complete picture of what a loan actually costs than the interest rate alone.

How to Use This Calculator

1. Enter the loan amount.
2. Enter the nominal interest rate.
3. Enter the loan term in months or years.
4. Enter all fees and charges (origination fee, points, closing costs).
5. Click Calculate to get the true APR.

APR Formula

APR is calculated by finding the interest rate that makes the present value of all loan payments equal to the loan amount minus fees. In simpler terms:

APR accounts for: Interest Rate + All Fees ÷ Loan Amount × Time Period

Example Calculation

Loan: $200,000 at 6.5% interest, 30 years, with $4,000 in fees

• Nominal interest rate: 6.5%
• Fees reduce effective loan amount to $196,000
• APR ≈ 6.72% — higher than the stated rate because fees are included

A lender advertising 6.25% with $8,000 in fees might have a higher APR than one advertising 6.5% with $1,000 in fees.

APR vs. Interest Rate

• Interest rate: The base cost of borrowing the principal amount.
• APR: Interest rate + fees + other charges, expressed annually. Always higher than (or equal to) the interest rate.

Common Mistakes to Avoid

• Comparing APR to interest rate — Always compare APR to APR across lenders.
• Ignoring short-term loans — On short-term loans, fees have a bigger impact on APR. A $500 fee on a 6-month loan has a massive APR effect.
• Thinking APR = total cost — APR is annualized. The actual total cost is APR × principal × years (roughly).
• Not asking for the APR upfront — Lenders are required by law (TILA) to disclose APR before you sign.

Frequently Asked Questions

Why is my APR higher than my interest rate?

Because APR includes fees and other charges beyond interest. A loan with a low interest rate but high origination fees will have a noticeably higher APR.

Does a lower APR always mean a better loan?

Usually, but consider the loan term too. If you plan to pay off the loan early, a loan with lower fees and slightly higher rate might cost less total than a low-APR loan with high upfront fees.

What is a good APR for a mortgage?

It depends on market conditions and your credit profile. In a 6.5%–7.5% rate environment, an APR of 6.75%–8% is typical. The gap between rate and APR narrows with lower fees.

How is credit card APR different?

Credit card APR is simply the annual interest rate on carried balances — there are no loan fees to include. Daily periodic rate = APR ÷ 365.

Is APR the same as EAR (Effective Annual Rate)?

No. APR doesn't account for compounding within the year. EAR (or APY) does. See our Compound Interest Calculator for more on compounding.

Conclusion

Always look at APR — not just the interest rate — when comparing loans. It's the fairest measure of what you're actually paying. Use this calculator to quickly convert any loan's rate and fees into a true APR for accurate comparison.

Related: Interest Rate Calculator | Mortgage Calculator | Loan Calculator | Compound Interest Calculator