How to use the APR calculator
Enter the loan amount, the annual interest rate quoted by the lender and the term in years, months or both. Then add any one-time fees, such as an origination or processing fee, and choose how they are paid:
- Paid upfront means the fee comes out of your pocket or is deducted from the money you receive, so you get less than the loan amount.
- Financed into the loan means the fee is added to the balance, so you borrow more and pay interest on the fee too.
Press Calculate to see the monthly payment, the APR, the amount you actually receive, the total interest, the total cost of the fees and the combined cost of interest and fees. The details section compares the quoted rate with the APR and shows a yearly amortization schedule.
What APR means
The interest rate only tells you what the lender charges on the balance. The APR also counts the fees. It is the annual rate at which the money you actually receive would grow into exactly the payments you make. Because fees reduce what you get for the same payments, the APR is higher than the interest rate whenever there are fees.
The method
With a monthly rate r (the annual rate divided by 12), the payment on a loan P over n months is M = P × r / (1 − (1 + r)^−n). The calculator first finds this payment for the amount you borrow. It then searches for the monthly rate at which the net amount you receive would produce the same payment over the same n months. That rate times 12 is the APR. The search uses repeated halving of a range that is certain to contain the answer, so it always converges.
Worked example
A loan of 10,000 at 6% for 5 years with a 500 fee paid upfront has a payment of 193.33. You receive only 9,500, and the rate that turns 9,500 into 60 payments of 193.33 is about 8.15%. Total interest is 1,599.68, so interest and fees together cost 2,099.68.
If the same 500 is financed instead, you borrow 10,500 and pay 202.99 a month. The APR is about 8.05%, but the fee now costs 579.98 because interest is charged on it.
Good to know
- A short term makes fees weigh more heavily, so the same fee raises the APR more on a 2-year loan than on a 30-year one.
- Compare loans by APR rather than by interest rate when their fees differ.
- Legal APR rules vary by country and may include or exclude certain charges. This calculator assumes a fixed rate and equal monthly payments, so treat the results as estimates, not financial advice.