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APR Calculator – The True Yearly Cost of a Loan with Fees

Find the annual percentage rate (APR) of a loan from its interest rate, term and the upfront fees or points you pay. APR shows the real yearly cost of borrowing, so you can compare offers that have different rates and fees.

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How to use the APR calculator

  1. Enter the loan amount.
  2. Enter the interest rate (the note rate on your offer).
  3. Enter the term in years or months.
  4. Enter the upfront fees and points you pay to get the loan.

You’ll see the APR next to the interest rate, plus your monthly payment, the total interest and the total cost of credit (interest plus fees).

How APR is worked out

First the normal monthly payment is calculated from the interest rate:

Payment = L × r × (1 + r)^n ÷ ((1 + r)^n − 1)

Then the calculator finds the monthly rate a at which:

Loan − Fees = Payment × (1 − (1 + a)^−n) ÷ a

APR = a × 12 × 100. There is no simple formula for a, so it is found by trial and improvement until the two sides match.

Worked examples

LoanRateTermFeesAPR
$200,000 mortgage6.5%30 years$4,000about 6.70%
$10,000 personal loan9%3 years$400about 11.81%

On the mortgage, the monthly payment is $1,264.14, the total interest about $255,089 and the total cost of credit — interest plus the $4,000 of fees — about $259,089. The exact APR is 6.695%.

Using APR to compare offers

Say one lender offers 6.25% with $6,000 in points and another 6.5% with $1,000 in fees on the same mortgage. Enter both: the one with the lower APR is cheaper if you keep the loan for the full term. If you expect to sell or refinance in a few years, the loan with lower upfront fees often wins even with a higher APR, because you won’t be around long enough to benefit from the lower rate.

What APR doesn’t tell you

  • Variable rates: APR on an adjustable loan assumes today’s rate continues.
  • Early payoff: APR assumes you keep the loan to the end.
  • Fees outside the APR: some costs, such as late fees, are never included.
  • Credit cards: card APR is simply the interest rate; annual fees are usually separate.

Try the result in the loan calculator or mortgage calculator, or see whether a new loan beats your current one with the refinance calculator. The lender’s official APR disclosure is the final word — see our disclaimer.

Frequently asked questions

What is APR?

APR, the annual percentage rate, is the yearly cost of a loan including interest and certain upfront fees, expressed as a single rate. It lets you compare loans fairly: a low interest rate with high fees can cost more than a slightly higher rate with no fees.

How is APR calculated?

The calculator finds your monthly payment from the loan amount, interest rate and term. It then finds the rate at which those same payments would exactly repay only the money you actually received — the loan minus fees. That rate, times 12, is the APR.

What is the APR on a $200,000 mortgage with $4,000 in fees?

At a 6.5% interest rate over 30 years, the monthly payment is about $1,264.14. Because you only effectively received $196,000, the APR is about 6.70%.

Why is the APR higher on a short loan with the same fees?

Fees are spread over fewer years, so they add more to each year’s cost. A $10,000 three-year loan at 9% with a $400 fee has an APR of about 11.81% — almost three points higher than the rate.

Which fees are included in APR?

Usually origination fees, discount points, broker fees and some closing costs. Rules on exactly what must be included vary by country and loan type; the lender’s official disclosure shows the legal APR.

Is APR the same as APY or AER?

No. APR is used for borrowing. APY (annual percentage yield) in the US and AER (annual equivalent rate) in the UK show what savings earn with compounding.

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