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APR Calculator
An APR calculator finds the true yearly cost of a loan. The interest rate a lender advertises does not include the fees you pay to get the loan, so two loans with the same rate can cost very different amounts. Enter the loan amount, interest rate, term, and fees, and this calculator shows your monthly payment and the APR — the single number that lets you compare offers fairly.
Origination and other up-front lender fees.
| Monthly payment | |
| Amount you actually receive | |
| Total paid over the loan | |
| Total interest + fees |
How it works
APR stands for annual percentage rate. It is the yearly cost of borrowing, expressed as a percentage, and it includes both the interest and most of the fees the lender charges. In the United States, the Truth in Lending Act requires lenders to disclose the APR on most consumer loans, precisely so borrowers can compare offers apples to apples instead of being misled by a low advertised rate with heavy fees.
Your loan amount is the total you borrow. The interest rate is the nominal rate the lender quotes. The term is how many years you take to repay it. The fees are up-front charges — origination fees, application fees, and similar costs — that come out of the money you receive.
The calculation works in two steps. First, the monthly payment is found from the interest rate with the standard loan formula:
where r is the monthly interest rate and n is the number of payments.
APR: the yearly rate that makes the same monthly payment repay (Amount − Fees) over the same term — found by solving the payment formula in reverse.
The key idea is that fees shrink the amount you actually get to use. Borrow $20,000 with $500 in fees and you only receive $19,500, but your payment is still based on $20,000. To repay $19,500 with that same payment takes a higher rate — and that higher rate is the APR. The bigger the fees, or the shorter the term, the further the APR sits above the interest rate, because the same fees are spread over fewer years.
Worked example
Maria in Phoenix, Arizona, takes out a $20,000 personal loan at 6% interest for 5 years, with $500 in origination fees. Her lender advertises 6% — but what is the real cost?
First, the monthly payment. The monthly rate is 6% ÷ 12 = 0.5%, over 60 payments, which gives a payment of $386.66 a month. Over 5 years she will pay about $23,199.36 in total.
Now the APR. She only receives $20,000 − $500 = $19,500, yet she pays $386.66 a month for 60 months. The rate that makes a $19,500 loan cost $386.66 a month is about 0.588% a month, or 7.06% APR per year. So while the advertised rate is 6%, the true yearly cost is 7.06% — the $500 fee adds a full percentage point. If another lender offered the same loan at 6.5% with no fees, its APR would be 6.5%, making it the cheaper loan despite the higher advertised rate. That is exactly the trap the APR is designed to expose.
FAQ
What is the difference between interest rate and APR?
The interest rate is the cost of borrowing the money itself. The APR (annual percentage rate) adds in the lender's fees, such as origination fees, so it shows the true yearly cost of the loan. The APR is almost always higher than the interest rate, and it is the fairest number for comparing two loan offers.
Why is my APR higher than my interest rate?
Because the APR includes fees that the interest rate ignores. If you borrow $20,000 and pay $500 in fees, you really only receive $19,500 to use, but you still pay interest on the full $20,000. That smaller amount received, with the same payment, pushes the true yearly cost above the advertised rate.
Is a lower APR always better?
Usually, yes, when you compare loans with the same amount and term. But watch for the term: a loan with a lower APR over 7 years can cost more total interest than a slightly higher APR over 5 years. Compare the APR and the total amount you will repay, not the APR alone.
Do all loans have an APR?
Under the federal Truth in Lending Act, US lenders must disclose the APR on most consumer loans, including mortgages, auto loans, and personal loans. Credit cards show an APR too, but it works differently because the balance changes each month.