APR Calculator
Calculate a loan's true annual percentage rate (APR) once upfront fees are factored into the cost of borrowing.
- Stated Rate6%
- True APR7.06%
The $500.00 in upfront fees is why the true cost of borrowing, 7.06%, runs higher than the 6% rate advertised on the loan.
- Stated Rate6%
- Monthly Payment$386.66
APR is higher than the stated rate because fees reduce what you actually receive while you still pay based on the full loan amount.
About the APR Calculator
The interest rate a lender advertises and the true cost of borrowing from them aren't the same number the moment fees enter the picture. Upfront fees — origination charges, points, processing fees — reduce how much money you actually receive while you still make payments calculated on the full loan amount, which means the effective rate you're really paying is higher than the stated rate on the note.
APR (annual percentage rate) is the standardized way of expressing that true cost, folding fees into an equivalent interest rate so loans with different fee structures can actually be compared apples-to-apples. This calculator computes it directly from a loan amount, stated rate, upfront fees and term.
It's meant for anyone comparing loan offers that look similar on their headline rate but differ in fees, or trying to understand why a lender's disclosed APR runs higher than the rate quoted verbally.
The loan details you enter are never sent anywhere — the calculation runs entirely in your browser.
How it’s calculated
The monthly payment is first calculated from the stated (nominal) rate on the full loan amount, the normal way. But you don't actually receive the full loan amount — fees are subtracted upfront, so your real net proceeds are lower.
True APR is the rate at which that same monthly payment, discounted back to a present value, equals your actual net proceeds rather than the full loan amount — found the same way the interest rate calculator finds an unknown rate: an iterative numerical search rather than a direct formula, since APR with fees folded in has no closed-form solution either.
Frequently asked questions
Why is APR higher than the interest rate a lender quotes?
Because APR accounts for upfront fees on top of the stated interest rate — fees reduce what you actually receive while your payments are still calculated on the full loan amount, which effectively raises the true cost of borrowing above the bare interest rate.
Does APR include every fee a lender might charge?
Only the fees factored into the calculation — this tool uses whatever you enter as upfront fees. Real-world APR disclosures are supposed to include most finance-related charges by regulation, but not always every possible fee (like a late payment fee), so read the loan's actual disclosure carefully.
Is APR the right number to compare two loan offers?
Generally yes, more so than the stated rate alone — since APR standardizes for fees, it's the number designed specifically for comparing loans that might otherwise look similar on their headline rate but differ in upfront cost.
Why can't APR with fees be solved with a simple formula the way a basic payment can?
Once fees change the net proceeds while payments stay based on the full loan amount, the rate that reconciles the two is embedded in an equation that can't be algebraically isolated — so it's found the same way an unknown interest rate is: by iteratively testing rates until the numbers converge.
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