APR Calculator

The Annual Percentage Rate (APR) represents the true yearly cost of your borrowing, including both the stated interest rate and any upfront fees such as origination charges, document fees, or closing costs. Lenders are legally required to disclose APR on most consumer loans in the United States under the Truth in Lending Act, precisely because the nominal interest rate alone can be misleading. Two loans with the same interest rate but different fee structures will have different APRs, and the higher-APR loan always costs more in total. This calculator helps you estimate the APR on any loan by combining your interest payments with your upfront fees into a single annualized cost figure, making it straightforward to compare competing offers on a level playing field. It is useful for mortgages, personal loans, auto loans, and any other fixed-term installment product. Understanding the gap between a loan's interest rate and its APR tells you how much the lender is effectively charging in fees relative to the loan size.

The calculation proceeds in three steps. Step 1: compute the monthly payment using the standard amortization formula: M = P × (r × (1+r)^n) ÷ ((1+r)^n − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. Step 2: calculate the Total Finance Charge = Total Interest + Fees, where Total Interest = (M × n) − P. Step 3: estimate APR using the constant ratio approximation: APR = (24 × TotalFinanceCharge × 100) ÷ (Net Principal × (n + 1)), where Net Principal = Loan Amount − Fees. This formula approximates the more complex IRR (Internal Rate of Return) calculation used by banks. For a zero-fee loan, APR will approximately equal the nominal interest rate — any gap is a small artifact of the constant ratio approximation method. For loans with significant origination fees, the APR can be 1–3 percentage points higher than the nominal rate, which is why comparing loan offers by APR rather than interest rate is essential.