APR Calculator – Find the True Cost of Your Loan
Our free APR calculator helps you find the true cost of any loan by including interest, origination fees, and closing costs. Whether it's a mortgage, car loan, or personal loan, this calculator shows your actual annual percentage rate (APR) — helping you make smarter financial decisions.
Include origination fees, closing costs, and other charges
Our APR calculator helps you understand the true cost of any loan by including interest, origination fees, and closing costs. Unlike a simple interest rate, APR (Annual Percentage Rate) factors in all the additional costs associated with borrowing money, giving you a more accurate picture of what your loan will actually cost over time.
To calculate APR manually, you would need to solve for the interest rate that makes the present value of all payments equal to the amount borrowed after fees. Our calculator does this complex calculation instantly, showing you how fees affect your effective interest rate. For example, a $10,000 loan at 8.5% with $500 in fees will have a higher APR than the stated 8.5% interest rate.
The interest rate only reflects the cost of borrowing the principal amount, while APR includes both the interest rate and additional costs like loan fees. This makes APR a more comprehensive measure of the true cost of borrowing.
Understanding APR vs Interest Rate:
- Interest rate = cost of borrowing money only
- APR = cost of borrowing + fees and charges
- APR is always equal to or higher than the interest rate
- APR allows for accurate comparison between different loan offers
When comparing loan offers, always look at the APR rather than just the interest rate. A loan with a lower interest rate but higher fees might actually cost more than a loan with a slightly higher interest rate but lower fees.
Calculating APR involves complex mathematics that accounts for the timing of all payments and fees. Our calculator simplifies this by using an iterative method to find the rate that makes the present value of all payments equal to the loan amount after fees.
APR Formula Explained:
The exact APR formula requires solving for the interest rate in a complex equation. The simplified approach is to use the formula: APR = ((Total Interest + Total Fees) / (Effective Loan Amount * Loan Term)) * 100, where the effective loan amount is the principal minus fees.
APR is especially useful when comparing different loan types like mortgage, auto, and personal loans. Since it includes all fees, you can accurately compare the total cost of borrowing across different lenders and loan products.
Our online APR calculator for any loan type allows you to compare multiple scenarios side-by-side. Whether you're looking at a mortgage apr calculator, loan apr calculator, or auto loan apr calculator, the principle remains the same - the loan with the lowest APR will typically be the most cost-effective option.
Many fees can impact your loan's APR, and it's important to account for all of them to get an accurate calculation. These include:
- Origination fees - charged by the lender for processing the loan
- Closing costs - expenses incurred during the loan closing process
- Discount points - fees paid to reduce the interest rate
- Prepaid interest - interest paid upfront
- Mortgage insurance premiums - required for certain loans
- Application fees - charged when submitting a loan application
When using our apr calculator with fees, make sure to include all costs associated with your loan to get the most accurate APR calculation.
How is APR different from interest rate?
APR includes both the interest rate and additional costs like loan fees, while the interest rate only reflects the cost of borrowing. This makes APR a more comprehensive measure of the true cost of a loan.
Why should I calculate APR before taking a loan?
Calculating APR helps you understand the real cost of borrowing and compare lenders fairly, even if they charge different fees. This allows you to make more informed financial decisions.
Does the APR calculator include all fees?
Yes, our calculator factors in origination fees, closing costs, and any other charges you enter to show your actual annual percentage rate. For the most accurate calculation, include all loan-related fees.