APR Calculator
Calculate the true Annual Percentage Rate (APR) of a loan by factoring in origination fees, points, and other upfront costs beyond the stated interest rate.
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How to use this calculator
APR is the interest rate on the net loan proceeds (after fees) that produces the same payment schedule. It is always higher than the nominal rate when fees exist.
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Enter the loan amount and stated (nominal) interest rate.
- 2
Enter all upfront fees: origination fee in dollars, discount points as a percentage, and any other closing costs.
- 3
Enter the loan term in months.
- 4
The APR shows the true cost — compare APRs across lenders for a fair "apples-to-apples" comparison.
Frequently asked questions
Why is APR higher than the interest rate?
The nominal rate only reflects the interest on the loan balance. APR incorporates upfront fees that are essentially prepaid interest. Since you receive less than the full loan amount (fees are deducted) but make payments on the full amount, the effective cost is higher.
What is a mortgage point?
One point = 1% of the loan amount paid upfront to reduce the interest rate. On a $200,000 loan, 1 point costs $2,000. Lenders typically lower the rate by 0.25% per point. Use this calculator to see whether paying points lowers the APR enough to justify the upfront cost given your expected loan term.
Should I always choose the lowest APR?
For the same loan term and amount, yes — APR is the best single comparison metric. But watch for: (1) APR comparisons across different terms are misleading; (2) some lenders exclude certain fees from APR; (3) if you plan to pay off early, a lower rate with higher fees might cost more than a slightly higher rate with no fees.
What fees are included in the legal APR calculation?
In the US (TILA), included: origination fees, points, underwriting fees, mortgage broker fees, PMI (if required). Excluded: appraisal fees, title insurance, credit report fees, inspection fees. Lenders must disclose APR on the Loan Estimate. Use this calculator with your actual fee schedule for a precise figure.
APR vs interest rate: why the difference matters
How APR is calculated
APR is the interest rate that, when applied to your net loan proceeds (amount received after fees), produces the same monthly payment as your nominal rate on the full loan amount. The calculation requires solving an equation iteratively — which is why lenders are required to disclose it rather than borrowers computing it by hand. Two loans with the same monthly payment can have very different APRs depending on fee structure.
When the APR comparison breaks down
APR assumes you hold the loan for the full term. If you refinance or sell early, a high-fee / low-rate mortgage (lower APR over 30 years) might actually cost more than a no-fee / higher-rate option over 5 years. Always calculate total out-of-pocket cost over your expected holding period rather than relying solely on APR.
Comparing personal loans and credit cards
For personal loans, APR is straightforward. For credit cards, APR is the nominal rate (no fees in the calculation by convention) but late fees, annual fees, and cash advance rates make the true cost higher. The Consumer Financial Protection Bureau (CFPB) recommends comparing credit cards on total cost of credit, not just the stated APR.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →