APR Calculator
Calculate the true Annual Percentage Rate (APR) of a loan including upfront and monthly fees, and compare it to the nominal interest rate.
APR calculator
Annual Percentage Rate (APR)
8.57%
1.07% higher than the nominal rate of 7.50%.
Nominal rate
7.50%
Monthly payment
$400.76
Total interest
$4,046
Total fees
$500
Total cost of borrowing
$4,546
Interest plus all fees over the life of the loan.
Frequently Asked Questions about the APR Calculator
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal only. APR adds upfront fees (origination, points, prepaid interest) and monthly fees, expressed as an annualized rate. APR is the better number for comparing offers.
How is APR calculated?
Compute the base monthly payment from the loan amount and note rate. Then solve for the rate where the present value of those payments equals loan amount minus upfront fees. The annualized solver rate is the APR.
Can you show a quick example?
On a $250,000 30-year loan at 6.5% with $5,000 in fees, the base payment is about $1,580. Because you only net $245,000 but still owe $1,580 per month, the APR works out to roughly 6.69%.
Why is APR required by law in the US?
The Truth in Lending Act (TILA) requires lenders to disclose APR on consumer credit so borrowers can compare loans on equal footing. APR appears on every mortgage Loan Estimate and Closing Disclosure.
What is a common pitfall with APR?
APR assumes you keep the loan for the full term. If you sell or refinance early, the upfront fees were not spread over 30 years, so your effective rate is higher than the disclosed APR.