APR Calculator
Calculate the true Annual Percentage Rate (APR) of borrowing including all fees and additional charges beyond the interest rate.
Loan Analysis
Annual Percentage Rate (APR)
Monthly Payment
Total Cost (Principal + Interest + Fees)
Total Interest & Fees
Understanding APR
What is APR?
The Annual Percentage Rate (APR) represents the true yearly cost of borrowing money, expressed as a percentage. Unlike the interest rate, APR includes not just the interest but also fees and other costs associated with the loan. This makes APR a more accurate measure of the total cost of borrowing and allows for better comparison between different loan offers.
APR vs Interest Rate
The interest rate is the cost of borrowing the principal loan amount, while APR includes the interest rate plus additional fees and charges. For example, a loan might have a 5% interest rate but a 5.5% APR when origination fees and other costs are included. The APR will always be equal to or higher than the interest rate - if they're the same, the loan has no additional fees.
What's Included in APR?
- Interest charges: The basic cost of borrowing
- Origination fees: Charges for processing and setting up the loan
- Broker fees: Commissions paid to loan brokers
- Closing costs: Various fees associated with closing the loan
- Discount points: Upfront fees paid to lower the interest rate
- Mortgage insurance: Required insurance premiums (for mortgages)
Why APR Matters
APR allows you to make apples-to-apples comparisons between loan offers. A loan with a lower interest rate but higher fees might actually cost more than a loan with a slightly higher interest rate and lower fees. By comparing APRs, you can identify the truly better deal. Always look at both the interest rate and APR when evaluating loans.
Tips for Using APR
- Compare APRs, not just rates: Two loans with the same interest rate can have very different APRs due to fees
- Ask for a Loan Estimate: Lenders must provide this standardized form showing APR within 3 days of your application
- Consider loan duration: APR assumes you'll keep the loan for its full term - if you pay off early, the effective cost may differ
- Watch for variable rates: For adjustable-rate loans, the APR is based on the initial rate and may not reflect future rate changes
- Don't ignore other factors: While important, APR isn't everything - also consider prepayment penalties, flexibility, and service
- Understand what's excluded: APR doesn't include every cost, such as title insurance, appraisal fees, or prepayment penalties
- Use APR for comparisons: APR is most useful for comparing similar loan products with similar terms and repayment schedules
Note: This APR calculator provides estimates based on the information you enter. Actual APR may vary based on lender-specific fees, loan type, credit score, and other factors. The calculation assumes all fees are financed into the loan and that you'll keep the loan for its full term. APR does not include all costs - some fees like appraisal, title insurance, and credit report fees may be excluded. For mortgages and certain other loans, lenders are required to provide official APR disclosures. Always review the Loan Estimate and Closing Disclosure forms for the most accurate APR information. This calculator is for educational purposes and should not be considered financial advice.
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