APR Calculator
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What Your Result Means
- True APR: The effective annual cost of borrowing when upfront fees are spread across the loan term. A higher APR than the stated rate means fees are adding meaningful cost.
- Monthly Payment: The fixed monthly amount based on the stated interest rate. This does not change with fees — fees affect only the APR.
- Total Interest: The cumulative interest paid over the full term at the stated rate, before adding fees.
- Total Cost: Everything you pay — all monthly payments plus all upfront fees. This is the true out-of-pocket cost of the loan.
How This Calculator Works
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.
Quick Questions
Why is APR different from the interest rate?
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.
What fees should I include?
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.
Should I always pick the loan with the lowest APR?
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.
Is APR required by law?
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.
Does this work for credit cards?
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.
Sources
- CFPB — Interest Rate vs. APR (explains the difference and what fees are included)
- Regulation Z (Truth in Lending) (federal APR disclosure requirements)
- FDIC — Truth in Lending Act (consumer protection overview)
Method & review
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.