You enter the loan amount, stated interest rate, term in years, and total upfront fees or closing costs. The tool first computes the monthly payment using the standard amortization formula at the stated rate. It then solves (via Newton's method) for the annual rate that would make the present value of that payment stream equal to the loan amount minus fees — that rate is the true APR. This approach matches the federal Truth in Lending Act (TILA) methodology for disclosing APR.
The interest rate determines your monthly payment, while APR folds in upfront fees to show the true annual cost. If a loan has zero fees, APR equals the interest rate. The bigger the fees relative to the loan, the wider the gap.
Include origination fees, discount points, application fees, underwriting fees, and any other prepaid finance charges required to get the loan. Do not include title insurance, appraisal fees, or per-diem interest — lenders handle those differently in APR calculations.
APR is the best single number for comparing similar loans, but it assumes you hold the loan to term. If you plan to refinance or sell early, a loan with higher fees but lower rate (lower APR) may actually cost more than one with lower fees and a slightly higher rate.
Yes. The Truth in Lending Act (TILA) requires lenders to disclose APR on consumer loans so borrowers can compare offers on an apples-to-apples basis. The Loan Estimate and Closing Disclosure forms both prominently feature APR.
Credit card APR is typically stated directly and equals the interest rate (no upfront fees to fold in). This calculator is designed for installment loans with closing costs — mortgages, auto loans, and personal loans.
Estimate only. Results reflect your inputs and standard formulas — they are not financial, tax, legal, health, or investment advice. Verify important decisions with a qualified professional.