How to use the APR calculator
- Enter your numbers. Fill in loan amount, stated interest rate, term, upfront finance charges.
- Read your results. Results update instantly. The headline shows the APR (annual percentage rate); the breakdown below show the details.
What APR measures
The annual percentage rate (APR) expresses the total finance charge (interest plus certain fees) as a yearly rate. Under the Truth in Lending Act, lenders must disclose it so borrowers can compare offers on equal terms.
How it’s calculated
Your payment is based on the full loan amount, but you effectively receive the loan minus prepaid fees. APR is the rate at which the payments exactly repay that smaller amount:
The calculator solves this equation numerically. On a $25,000, 60-month loan at 8% with $750 in fees, the APR is about 9.25%.
Which fees count
Origination fees, discount points, prepaid interest and mortgage insurance usually count. Appraisal, title and credit report fees on mortgages usually don’t. Your lender’s Loan Estimate or TILA disclosure shows the official APR.
Worked example
With these inputs: loan amount $25,000; stated interest rate 8%; term (months) 60; upfront finance charges (origination, points, prepaid fees) $750.
The calculator gives an APR (annual percentage rate) of 9.298% (vs 8% stated rate). Other results: monthly payment $506.91, amount you actually receive $24,250, total interest $5,415, total finance charge $6,165.
What your results mean
The gap between APR and the stated rate shows how much fees add to the cost each year. A small gap means fees are minor; a large gap means comparing on rate alone would be misleading.
Tips
- Compare loans with the same term by APR.
- Ask which fees are included in the lender’s APR.
- For short holding periods, compare total upfront costs too.
Frequently asked questions
How do I calculate APR by hand?
Find the payment on the full loan, then find the rate at which that payment repays the loan minus fees. That takes trial and error or a financial calculator.
Does APR include compounding?
No. APR is the periodic rate × periods per year. The effective annual rate with compounding is slightly higher.
Is a lower APR always better?
For the same term, yes. For mortgages, APR assumes you keep the loan for its full term; if you’ll sell or refinance early, upfront fees weigh more heavily than APR suggests.
What is the difference between APR and APY?
APR is a simple annual rate for borrowing; APY includes compounding and is used for savings.
Why do short loans with fees have high APRs?
The fee is spread over fewer months, so it adds more per year.
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