About the APR Calculator
This APR calculator shows what a loan really costs per year once upfront fees are counted. Lenders advertise an interest rate, but origination fees, points, documentation fees and other prepaid finance charges mean you either receive less cash or owe more than you borrowed. The annual percentage rate (APR) folds those charges into a single yearly rate, so two offers with different rates and fees can be compared on equal terms.
Enter the loan amount, the quoted interest rate, the term and the total fees. Choose whether the fees are deducted from the money you receive (typical for personal loans) or added to the balance you repay (common when fees are financed). The calculator solves for the rate that makes the payments you make equal to the cash you actually get — the same actuarial method used for Truth in Lending disclosures on fixed-rate installment loans.
Use it to check a Loan Estimate or personal loan offer, to decide whether a lower rate with higher fees is really cheaper, or to see how much a fee adds to the yearly cost on a short loan versus a long one. It assumes fixed monthly payments and no prepayment.
With the default inputs, the apr is 9.298%. Change any value above to recalculate instantly.
How to use the apr calculator
- 1Enter the amount you are borrowing and the quoted interest rate.
- 2Set the loan term in years.
- 3Add up every upfront fee or prepaid finance charge and enter the total.
- 4Choose whether the fees are taken out of your proceeds or added to the balance.
- 5Compare the APR with other offers — the lower APR is the cheaper loan over its full term.
Formula and method
First the monthly payment M is found from the amount you must repay (the loan, plus fees if they are financed) using the standard amortization formula at the quoted rate. Then the calculator searches for the monthly rate i at which the present value of those n payments equals the cash you actually receive (the loan minus fees if they are deducted, or the full loan if fees are financed).
APR is that monthly rate × 12, which is how US Truth in Lending (Regulation Z) states the APR for monthly installment loans. The effective annual rate compounds it: (1 + APR/12)^12 − 1. Because fees are a fixed cost, they raise the APR more on short loans than long ones.
- M
- Monthly payment at the quoted interest rate
- i
- Monthly rate that equates payments with cash received
- n
- Number of monthly payments
- APR
- Annual percentage rate = 12 × i
Worked examples
$20,000 at 8% for 5 years with $600 in fees
A $20,000 loan at 8% for 60 months costs $405.53 a month. Because $600 is deducted, you only receive $19,400, so the rate that equates $405.53 × 60 with $19,400 is about 9.30% — the APR. The fees add roughly 1.3 percentage points to the yearly cost.
Same fee on a 2-year loan
A $10,000 two-year loan at 10% has a $461.45 payment. With $500 withheld you receive $9,500, pushing the APR to about 15.18% — five points above the quoted rate because the fee is spread over only 24 payments.
Fees financed into the balance
Rolling $450 of fees into the loan makes the balance $15,450 and the payment $369.97. You still received only $15,000, so the APR is about 8.54% even though the interest rate is 7%.
Frequently asked questions
What is the difference between APR and interest rate?+
The interest rate is the cost of borrowing the principal only. APR adds required fees and prepaid finance charges and expresses the total as a yearly rate, so APR is always equal to or higher than the interest rate on a loan with fees.
Which fees are included in APR?+
Generally origination or underwriting fees, discount points, mortgage broker fees and other charges you must pay to get the credit. Third-party costs you would pay in a cash deal, such as appraisals or title insurance on a mortgage, are usually excluded under Regulation Z.
Why is APR higher on short loans with the same fee?+
A fee is a one-time cost. Spread over 24 payments it is a large share of each year’s cost; spread over 360 payments it barely moves the yearly rate. That is why a small fee can double the APR of a very short loan.
Is APR the same as APY or effective annual rate?+
No. APR is a simple annualized rate (monthly rate × 12). APY or the effective annual rate adds compounding, so a 12% APR compounded monthly is about a 12.68% effective annual rate.
Should I pick the loan with the lowest APR?+
For loans you will keep to the end, the lowest APR is the cheapest. If you expect to repay or refinance early, upfront fees matter more because you pay them in full but save less interest, so compare total cost over the time you actually expect to hold the loan.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.