APR Calculator
The APR Calculator reveals the true cost of any loan by including both the interest rate and all fees. Lenders are required by law to disclose APR (in the US under the Truth in Lending Act, and in the UK under the Consumer Credit Act), making it the most accurate way to compare loan offers — whether for a mortgage, car loan, or personal loan.
Educational estimate. Calculator results are for planning and information only, not financial, tax, medical, legal, or engineering advice. Verify important decisions with official sources or a qualified professional.
APR Calculator
Annual Percentage Rate — True Loan Cost
📐 Formula & Method
APR Calculation Method
APR is calculated by spreading the total cost of the loan (interest + fees) over the loan term as a yearly percentage. A more precise method solves for the internal rate of return (IRR) on the cash flows, which is what this calculator uses.
Monthly Payment (with fees included in effective principal)
The APR is the rate that makes the present value of all payments equal to the net loan proceeds (loan amount minus upfront fees). This is solved iteratively.
📋 How to Use
-
1
Enter the total loan amount you are borrowing.
-
2
Enter the nominal (stated) annual interest rate from the lender.
-
3
Enter the loan term in months (e.g., 360 for a 30-year mortgage, 60 for a 5-year car loan).
-
4
Enter all one-time fees charged by the lender (origination fees, points, closing costs, etc.).
-
5
Click Calculate to see the APR and compare it to the stated interest rate.
💡 Key Insights
-
APR is always at least equal to — and almost always higher than — the stated interest rate. The gap reveals the true cost of the lender's fees.
-
An APR–rate gap above ~0.4% on a 30-year mortgage typically signals high origination charges or discount points worth scrutinising.
-
APR assumes you keep the loan for its full term. If you sell or refinance in 5–7 years, paying points (which raise APR less than they lower the rate) often does NOT pay off.
-
In the UK, APRC also includes mandatory product fees and is calculated over the entire term using the current reversion rate after any initial fix — so APRCs often look high on short-fix products.
🧮 Worked Examples
Example — 30-yr loan with $4,500 in fees
A $300,000 loan at 6.75% nominal for 30 years with $4,500 origination + closing fees rolled in.
📊 How to Interpret Your Result
APR – Rate gap under 0.15%
Low-fee loan. Closing costs are modest relative to the loan size.
APR – Rate gap 0.15%–0.40%
Average fee level for US mortgages. Ask the lender for an itemised Loan Estimate.
APR – Rate gap above 0.40%
High fee burden. Compare against at least two competing Loan Estimates.
⚠️ Common Mistakes to Avoid
Comparing APR across different loan terms.
Fix: APR is only directly comparable when the loan term is identical. A 15-year APR is not directly comparable to a 30-year APR.
Forgetting to include all lender-required fees.
Fix: Include origination, discount points, processing, underwriting, and any required mortgage insurance up-front premium.
Assuming the lowest APR is always best.
Fix: If you'll refinance or sell early, the lowest no-points rate may beat the lowest APR.
🎯 Who This Calculator Is For
Comparing lender quotes
Use APR — not the headline rate — to normalize fees across competing Loan Estimates.
Deciding whether to buy discount points
Calculate APR with and without points to see the true effective rate.
APR vs. Interest Rate: Why It Matters
The Annual Percentage Rate (APR) is the true cost of borrowing, expressed as a yearly rate. Unlike the nominal interest rate — which only reflects the cost of the loan principal — APR includes all fees and costs associated with the loan. This makes APR the most accurate way to compare loan offers from different lenders.
In the United States, the Truth in Lending Act (TILA) requires all lenders to disclose the APR before a loan agreement is signed. This protects consumers from misleading "low rate" advertising that hides high fees. In the UK, the Consumer Credit Act 1974 and its 2010 amendments require lenders to display a "representative APR" in all credit advertisements.
For a mortgage, APR typically includes the interest rate, discount points (1 point = 1% of the loan), origination fees, mortgage broker fees, and certain closing costs. A mortgage advertised at 6.5% interest rate might have an APR of 6.85% once fees are included. Over a 30-year loan, this difference can amount to tens of thousands of dollars.
For credit cards, APR = the interest rate because there are typically no upfront fees. The APR shown on a credit card statement is the annual rate applied to any unpaid balance. The daily periodic rate is the APR ÷ 365. So a 20% APR credit card charges about 0.0548% per day on outstanding balances.
🔬 Methodology & Accuracy
Formula: APR is solved iteratively (Newton-Raphson) as the rate that equates the present value of payments to the net proceeds (loan minus fees). This matches the Federal Reserve Regulation Z definition.
Data sources: TILA (Truth-in-Lending Act) APR rules; FCA MCOB rules for UK mortgage APRC.
Last reviewed: January 2026 · Accuracy: Results are precise to two decimal places using IEEE-754 double-precision arithmetic. Intended for educational and planning use only.
For informational purposes only. Results are estimates based on the inputs and formulas provided. For financial, tax, medical, or legal decisions, consult a qualified professional. Rates and regulations change — always verify current figures with official sources.
Accuracy & Feedback
❓ Frequently Asked Questions
Complete your Finance picture
These tools naturally pair with the APR Calculator — use them in order to get a full view.