By ToolzHive
About this tool
The APR calculator finds the real yearly cost of borrowing. Lenders often charge upfront fees on top of interest, which means you receive less money than you repay interest on. APR spreads those fees over the loan and expresses the total cost as one annual rate. This calculator solves for the exact APR from the loan amount, interest rate, term and fees.
How to use APR Calculator
- Enter the loan amount, the quoted interest rate and the term.
- Add all upfront fees, such as origination or processing charges.
- Compare the APR with the interest rate. The higher the fees, the bigger the gap.
Worked example
A $20,000 loan at 8% for 5 years with $600 in fees has a monthly payment of about $405.53. Because you effectively receive only $19,400, the true APR is about 9.30%.
Why is APR higher than the interest rate?
APR includes fees that the interest rate does not. When there are no fees, APR and the interest rate are the same.
Should I always choose the lowest APR?
APR is the best single number for comparing loans with the same term. Also consider the monthly payment, the total cost and any penalties for early repayment.
How is APR calculated?
It is the annual rate at which the present value of all your payments equals the amount you actually receive after fees. The calculator finds it numerically for an exact result.
Put this guide into practice
- APR Calculator — Find the true annual percentage rate of a loan including upfront fees.