APR Calculator
Find the true Annual Percentage Rate of any loan. Enter the loan amount, nominal interest rate, upfront fees, and term to see how fees raise your effective cost of borrowing.
Enter loan details to calculate APR.
True APR
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Nominal rate
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Rate difference
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Monthly payment
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Total interest
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Total fees
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Total cost
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Cost breakdown
How it works
How APR is calculated.
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Step 1 — Compute the monthly payment
Using the nominal interest rate and full loan amount, calculate the standard amortizing monthly payment: M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1), where r = nominal rate ÷ 12 and n = term in months. Example: $10,000 at 5% for 36 months → $299.71/month.
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Step 2 — Subtract fees from the loan proceeds
The lender charges $300 in fees, so you effectively receive $9,700 — but still pay $299.71/month for 36 months. Your true cost is higher than 5% because you're paying as if you borrowed $10,000 but only received $9,700.
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Step 3 — Solve for the rate that matches net proceeds
Find the monthly rate r* such that $9,700 = $299.71 × (1−(1+r*)^−36) / r*. This requires iterative solving (bisection). Multiply r* × 12 to get APR. For this example, APR ≈ 6.47% — 1.47 percentage points above the nominal 5%.
FAQ
Frequently asked questions.
How to calculate APR on a loan?
APR is calculated in two steps. First, compute your monthly payment using the nominal interest rate and full loan amount: M = P × r(1+r)ⁿ / ((1+r)ⁿ − 1). Second, find the monthly rate r* that discounts those same payments back to your net loan proceeds (loan amount minus fees): P − Fees = M × (1 − (1+r*)^−n) / r*. Multiply r* × 12 to get APR. Because you effectively receive less money but pay the same amount, APR is always higher than the nominal rate when fees exist.
What does 7% APR mean on a loan?
A 7% APR means your true annual cost of borrowing — including the nominal interest rate and all mandatory fees — is 7% of the loan amount per year (using the standard amortization formula). On a $10,000 loan at 7% APR for 3 years, your monthly payment is $308.77 and you pay $1,115.72 in total interest. APR is the standardized figure lenders must disclose, so you can compare loans from different lenders on equal footing.
What is the difference between APR and interest rate?
The interest rate (nominal rate) is the base cost of borrowing. APR includes the interest rate plus mandatory fees — origination fees, points, closing costs, mortgage broker fees — expressed as a single annual percentage. APR is always ≥ the nominal rate. A $10,000 loan at 5% with $300 in fees has a nominal rate of 5% but an APR of roughly 7.05%, because the fees increase your true cost of borrowing.
What fees are included in APR?
Lenders must include: origination/underwriting fees, discount points (prepaid interest), mortgage broker fees, and any closing costs paid directly to the lender. Not included: appraisal fees, title insurance, attorney fees, recording fees, and escrow deposits — because these go to third parties, not the lender. The Truth in Lending Act (TILA) specifies exactly which charges must appear in APR.
Should I compare loans by APR or interest rate?
Compare by APR if you plan to hold the loan to full term — it captures total cost including fees. If you plan to refinance or sell before maturity, focus on rate plus estimate how quickly the upfront fees are amortized. A low-rate/high-fee loan often looks worse on APR but can be cheaper for a short holding period (say, 2–3 years on a 30-year mortgage).
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Last updated: July 28, 2026