Finance
APR Calculator
Determine the true cost of borrowing. Enter your loan amount, interest rate, term, and upfront fees to solve for the loan's Annual Percentage Rate.
About This Tool
This APR calculator resolves the true interest rate of a loan, incorporating origination, points, and other closing fees into the cost of borrowing.
APR Present Value Equator
Amount_Financed = Sum( PMT / (1 + APR/12)^t )Finds the discount rate (APR) that matches the net loan proceeds (Loan Amount minus upfront fees) to the present value of all scheduled payments.
When APR Matters Most
APR is most useful when two loans have different combinations of interest rates and upfront fees. A lower advertised rate can be more expensive if fees are high.
APR is less useful for comparing loans you expect to refinance or pay off early, because upfront fees have less time to spread across the life of the loan.
Common Mistakes
Do not compare one lender's interest rate against another lender's APR. Compare APR to APR, then review payment size, fees, prepayment rules, and closing cash needed.
APR may not include every real-world cost. Read the loan estimate or disclosure documents for the exact included charges.
Examples
Standard Mortgage APR comparison ($200,000 Loan)
Loan amount of $200,000, nominal interest rate of 5.5%, term of 30 years (360 months), upfront fees of $4,000.
Result: Monthly payment of $1,135.58. Calculated APR of 5.684%. Total interest paid of $208,808.06.
FAQ
What is the difference between Interest Rate and APR?
The interest rate (nominal rate) is the yearly cost of the loan principal expressed as a percentage. The APR (Annual Percentage Rate) is the broader measure of the cost of a loan, including both the interest rate and other finance charges or upfront fees spread over the life of the loan.
Which fees are included in APR?
Typically, fees included in APR calculations are loan origination fees, closing costs, discount points, private mortgage insurance (PMI), and processing fees. Third-party fees like title fees or appraisal fees are usually excluded.
Why is APR useful for comparing loans?
APR provides a standardized benchmark. A lender offering a lower interest rate but high upfront fees might have a higher APR than a lender offering a slightly higher interest rate with low fees. Comparing APRs helps identify the cheaper borrowing option.
References
Important Note
Results are estimates for planning and education. They do not replace financial, tax, legal, or professional advice. Review assumptions before making decisions.
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