APR Calculator

Calculate the Annual Percentage Rate (APR) to find the true cost of loans including interest rates, fees, points, and closing costs. Compare lending costs accurately.

How to use: Enter loan amount, interest rate, term, and all associated fees to calculate the APR - the true annualized cost of borrowing money including all charges.

Annual Percentage Rate Calculator

Loan Information
%
Loan Fees & Costs
APR Analysis Results
Interest Rate vs APR Comparison
6.50%
Interest Rate
Principal and interest only
6.85%
Annual Percentage Rate
True cost including all fees
$0
Monthly Payment
Principal & interest
$0
Total Fees
All loan costs
$0
Total Interest
Over loan term
$0
Total Loan Cost
Interest + fees

Loan Cost Breakdown

Principal ($0)
Interest ($0)
Fees ($0)
Cost Component Amount Percentage Description

Understanding Annual Percentage Rate (APR)

The Annual Percentage Rate (APR) is a comprehensive measure of the cost of borrowing money that includes not only the interest rate but also all fees and charges associated with obtaining the loan. Unlike the interest rate, which only reflects the cost of borrowing the principal, APR provides the true annual cost of the loan as a percentage.

The Truth in Lending Act requires lenders to display APRs so borrowers can easily compare lending costs between different lenders and loan products. Understanding APR is crucial for making informed borrowing decisions and finding the most cost-effective financing options.

APR vs Interest Rate

Interest Rate

Cost of borrowing principal amount only

Simple percentage charged on the loan balance

Annual Percentage Rate (APR)

Interest rate + fees expressed as annual percentage

True cost of borrowing including all charges

Aspect Interest Rate APR
IncludesInterest onlyInterest + fees
PurposeCalculate paymentCompare loan costs
Required by lawNoYes (Truth in Lending Act)
Better for comparisonNoYes

Fees Typically Included in APR

Included in APR Excluded from APR
• Origination fees
• Discount points
• Processing fees
• Application fees
• Underwriting fees
• Broker fees
• Document preparation
• PMI (first year)
• Appraisal fees
• Survey fees
• Title insurance
• Recording fees
• Inspection fees
• Attorney fees
• Prepaid interest
• Property taxes/insurance

Types of APR

Fixed APR: Rate remains constant throughout the loan term
Variable APR: Rate can change based on market conditions or index
Introductory APR: Lower rate for initial period, then adjusts higher
Penalty APR: Higher rate applied for late payments or violations

APR Calculation Method

Step 1: Add all fees to the loan amount to get the "amount financed"

Step 2: Calculate payments using the interest rate

Step 3: Find the rate that makes the present value of payments equal the amount financed

Step 4: Convert to annual percentage rate

APR Formula (Simplified)

APR = (Total Interest + Fees) ÷ Loan Amount ÷ Years × 100

Actual calculation uses present value and iterative methods

APR by Loan Type

Loan Type Typical APR Range Key Factors
Mortgages6-8%Credit score, down payment, loan type
Auto Loans4-12%Credit score, vehicle age, loan term
Personal Loans6-36%Credit score, income, loan purpose
Credit Cards15-25%Credit score, card type, rewards
Student Loans4-12%Federal vs private, fixed vs variable

Factors Affecting APR

Credit Score: Higher scores qualify for lower APRs
Loan Amount: Larger loans may have lower APRs due to economies of scale
Loan Term: Shorter terms typically have lower APRs
Down Payment: Larger down payments can reduce APR
Loan Type: Secured loans generally have lower APRs than unsecured

Using APR for Loan Comparison

Loan Option Interest Rate Fees APR Better Choice
Option A6.00%$5,0006.35%
Option B5.75%$8,0006.45%

In this example, Option A has a higher interest rate but lower APR, making it the better deal overall.

Limitations of APR

Assumes Full Term: APR calculations assume you keep the loan for its full term

Early Payoff Impact: If you pay off early, upfront fees have greater impact on true cost

Variable Rate Changes: APR for variable loans is based on current rates

Different Fee Structures: Some fees may be excluded that affect your costs

APR Regulations

Truth in Lending Act (TILA)

Requires APR disclosure for most consumer loans

Standardizes APR calculation and disclosure requirements

Regulation Applies To Requirements
TILAConsumer loansAPR disclosure, right of rescission
CARD ActCredit cardsRate change notifications, penalty restrictions
RESPAMortgagesGood faith estimate, settlement disclosure

APR Shopping Tips

Compare APRs, Not Just Rates: APR gives the true cost comparison
Get Multiple Quotes: Shop with at least 3-5 lenders within 14-45 days
Understand All Fees: Ask for itemized list of all costs
Consider Your Timeline: If paying off early, focus more on low fees

Special APR Scenarios

Credit Card APRs: May include purchase APR, cash advance APR, penalty APR

Adjustable Rate Mortgages: APR based on fully indexed rate, not teaser rate

Points vs Rate Trade-offs: Lower rate with points may have higher APR

No-Cost Loans: Higher rate instead of upfront fees affects APR calculation

APR Calculation Examples

Example: $200,000 Mortgage

6% rate + $4,000 fees = 6.25% APR

$4,000 in fees adds 0.25% to the effective annual rate

Loan Amount Interest Rate Total Fees Resulting APR
$100,0005.00%$2,0005.25%
$200,0006.00%$4,0006.25%
$300,0006.50%$6,0006.75%

Beyond APR: Other Considerations

Monthly Payment: Must fit your budget regardless of APR

Loan Terms: Consider flexibility, prepayment penalties, rate locks

Lender Reputation: Service quality and reliability matter

Closing Timeline: Some lenders close faster than others

Loan Features: Rate locks, float-down options, assumability

Smart Shopping Strategy: Use APR to compare loans with similar terms, but also consider your specific situation, payment timeline, and the lender's reputation for service. The lowest APR isn't always the best choice if it comes with poor service or inflexible terms.