APR Calculator
Calculate the true Annual Percentage Rate (APR) of a loan by including all fees and points. APR reflects the real cost of borrowing — always higher than the nominal rate when fees exist.
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How It Works
Enter loan amount, nominal interest rate, loan term, and all included fees. The calculator finds APR by solving for the rate that equates the fee-adjusted loan amount with the present value of all payments. APR will always equal the interest rate when fees = 0, and exceed it when fees > 0.
APR: solve for r in PV(payments, r) = Loan - Fees$300k loan, 6.5%, 30yr, $3k fees → APR ≈ 6.61%Two lenders: Lender A offers 6.5% rate with $2,000 fees; Lender B offers 6.75% rate with $0 fees. Their APRs are similar — use the calculator to compare. Short-term: high-fee loan costs more (break-even not reached). Long-term: lower-rate loan wins.
APR difference = rate premium equivalent of fees6.5% + $2k fees vs 6.75% + $0 fees → compare APREnter loan with points as fees. Each point costs 1% of loan amount and typically lowers rate by 0.25%. Break-even = point cost ÷ monthly payment savings. If you keep loan past break-even, paying points saves money. The APR comparison shows whether paying points improves your total cost position.
Break-even = point cost ÷ monthly savings1 point on $300k = $3,000, saves $50/mo → 60 months break-evenAPR is most useful for short-term loans and leases where fees represent a larger proportion of total cost. A 2-year personal loan with a 2% origination fee has its APR raised significantly because the fee is spread over just 24 payments instead of 360.
APR impact = fee / term_months × 12 / loan (approximate)2% fee on 2yr loan raises APR ~1.5% above nominal rateUS federal law (TILA) requires lenders to disclose APR within 3 days of application. This lets borrowers compare loans with different fee structures on a common basis. The disclosed APR must include all required fees. Use this calculator to verify lender-disclosed APRs.
TILA requires APR disclosure within 3 days of applicationCompare disclosed APR across lenders for an apples-to-apples comparisonQuick Reference
Verify these in the calculator above.
Mortgage
$300k, 6.5%, 30yr, $3k fees
APR ≈ 6.61%
No fees
$300k, 6.5%, 30yr, $0 fees
APR = 6.5% (same)
Auto loan
$20k auto, 5%, 5yr, $400 fees
APR ≈ 5.41%
Points
1 point = 1% of loan amount
Paid upfront
Break-even
Break-even: $3k cost, $50/mo save
60 months
Fee impact
Short term amplifies fee impact
2yr vs 30yr
Legal
TILA requires disclosure within
3 days
No fees case
APR = rate when fees =
$0
Tips & Shortcuts
Always compare loans using APR, not just the interest rate. Two loans with the same rate but different fees have different true costs.
For short-term loans (under 5 years), fees have a bigger impact on APR — a 1% origination fee raises APR by roughly 0.5% on a 2-year term.
When refinancing, calculate the break-even point: closing costs ÷ monthly savings. If you plan to move before break-even, refinancing costs more.
Mortgage APR does NOT include all costs — title insurance, appraisal, and prepaid items are excluded. Always read the Loan Estimate for the full picture.
For auto loans, dealer fees and add-ons often carry high effective APR. Calculate the true APR including all fees before signing.
Common Mistakes
Comparing interest rates instead of APR across lenders
Two loans with 6.5% rate can have APRs of 6.61% and 6.85% depending on fees. Always compare APR. The lender with lower APR has the lower true cost, assuming you keep the loan to maturity.
Assuming higher APR always means higher monthly payment
APR includes fees, but monthly payment depends only on loan amount, interest rate, and term. A high-fee loan can have a higher APR but lower monthly payment than a fee-free loan at a slightly higher rate.
Using APR for investment return comparison
APR is a borrowing cost measure, not an investment return measure. For investments, use APY (Annual Percentage Yield) which accounts for compounding. They measure different things.
Forgetting that APR assumes you keep the loan full-term
If you sell or refinance before the loan matures, the true cost of upfront fees is higher than APR suggests. For short hold periods, calculate total cost directly.
Ignoring excluded fees when comparing APR
APR does not include title insurance, appraisal, and prepaid items. Add these manually to compare total closing costs across lenders.
Frequently Asked Questions
APR (Annual Percentage Rate) is the true cost of a loan per year, including interest rate AND all fees (origination fees, points, closing costs). A $200,000 mortgage at 6.5% with $4,000 in fees has an APR higher than 6.5% because the fees effectively increase the cost of borrowing.
The interest rate determines your monthly payment. APR determines the true annual cost including fees. Two loans with the same interest rate can have different APRs if their fees differ. Always compare APR — not just interest rate — when shopping for loans.
APR is the interest rate that makes the present value of all future payments equal to the loan amount minus all upfront fees. It is found by solving for r in: Loan Amount - Fees = Σ [Payment / (1+r/12)^n]. The calculator solves this numerically.
Not always — it depends on how long you keep the loan. High-fee loans have high APR but lower monthly payments. If you sell or refinance quickly (before break-even), the low-rate/high-fee loan costs more. If you keep the loan full-term, compare total cost, not just APR.
Fees that must be included in APR (per US Truth in Lending Act): origination fees, discount points, underwriting fees, broker fees, mortgage insurance. Fees NOT included: appraisal, title insurance, recording fees, prepaid interest. The calculator lets you enter the total of included fees.
One point = 1% of the loan amount paid upfront to reduce the interest rate (typically by 0.25% per point). Points increase APR but lower the monthly payment. Calculate break-even: upfront cost ÷ monthly savings = months to recoup.
Shorter terms spread fees over fewer payments, making APR higher for the same fee amount. A $3,000 fee on a 5-year loan raises APR more than the same fee on a 30-year loan. This is why short-term loans often show much higher APR than long-term loans with the same fees.
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