APR Calculator

How does this tool calculate the APR?

It first computes the level monthly payment on the full loan amount at the nominal rate, using payment = P × r ÷ (1 − (1 + r)^−n). It then treats the loan amount minus all upfront fees as the cash actually received, and searches for the monthly rate i at which those payments discount to that smaller amount. The APR shown is i × 12, a nominal annual figure, not a compounded effective rate.

Which fees are counted?

Three amounts are added together: the origination fee, the points (a percentage of the loan amount) and the other upfront fees. The default $2,000 fee, 1% of $200,000 as points and $500 of other fees total $4,500.00. All of it is assumed to be deducted from the proceeds, while the payment is still calculated on the full loan amount.

Why is the APR higher than the nominal rate?

Because you repay the full amount but receive less than the full amount. For the defaults, the nominal rate is 6.50% and the tool returns 6.72%, with a payment of $1,264.14. With every fee set to zero the two rates match at 6.50%.

Does the loan term change the APR for the same fees?

Yes, because a fixed fee is spread over fewer or more months. A $10,000 loan at a 12% nominal rate with $300 of fees gives an APR of 17.82% over 12 months, 14.13% over 36 months and 13.35% over 60 months. Longer terms dilute the same charge.

What happens at a 0% nominal rate or when fees are too high?

A 0% nominal rate is respected: the payment is the loan divided by the months and any APR above zero comes entirely from fees. $200,000 over 360 months with $4,500 of fees gives 0.15%. If fees equal or exceed the loan amount, or the loan or term is 0, the tool shows n/a because no positive amount is received.

Is this the same as the APR a lender must disclose?

No. Regulations define what counts as a finance charge and how the figure is calculated, and the rules differ between countries and products. This tool uses only the three fee fields above, equal monthly payments and a fixed rate, so a disclosure may differ. The lender’s documents govern.

What does the “Effective Monthly Rate” line show?

It is the monthly rate i the solver found, shown as a percentage, so multiplying it by 12 gives the APR. For the defaults it is 0.56% a month. It is not an annual compounded rate.

What kinds of loans does it not fit?

Variable rates, interest-only periods, balloon payments, irregular payment dates, fees paid monthly and fees rolled into the loan balance are not modelled. Real rates, fees and rules change, so use the output to compare structures and not as a quote.