Loans
APR Calculator
Estimate the effective APR when loan fees are included with the stated interest rate. Adjust the assumptions to test different scenarios and use the result as a planning estimate, not a promise.
Loans
APR Calculator
Result
How to use this calculator
Enter the loan amount, the stated interest rate, any fees charged by the lender (origination fees, points, closing costs), and the loan term. The calculator converts these inputs into the annual percentage rate — the single number that reflects both the interest rate and the fees on an annualized basis. Use this to compare loans from different lenders on equal footing, because advertised rates often leave fees out of the headline.
For a mortgage, "points" are prepaid interest — each point equals 1% of the loan amount paid upfront to buy down the rate. Include any points in the fee field to get an accurate APR comparison between loans with and without points.
What your result means
APR is a standardized cost measure required by US law (Truth in Lending Act) on most consumer loans. It lets you compare a loan with a 6.5% rate and $3,000 in fees against one with a 7% rate and no fees, on equal terms. The one with the lower APR is the cheaper loan, even if its stated rate is higher.
The gap between interest rate and APR tells you how fee-heavy a loan is. A large spread (say, 0.5% or more) means significant fees are being rolled into the cost. A small spread means the lender's fees are minimal. For short-term loans, fees hurt more than for long-term loans, because the amortization period over which you "recover" the fee cost is shorter.
What the math leaves out
APR is most useful for comparing fixed-rate loans with similar terms. For adjustable-rate mortgages, the disclosed APR assumes the initial rate holds forever — which it won't. For loans you plan to pay off early, APR understates the effective cost of upfront fees, because you're not spreading those fees across the full term you're being measured against.
Credit cards have APRs too, but the comparison is different — card APRs are simple daily rates applied to the carried balance, and the effective cost depends entirely on how you use the card. A 24% APR on a card you pay in full monthly costs you nothing. The same APR on a carried balance costs a lot.
Interest rate vs. APR: a plain-English summary
The interest rate is what the lender charges on the principal. APR adds fees to that cost and expresses the total as a yearly rate. On a mortgage, the APR is always higher than the interest rate (because fees exist). If a lender's APR equals the interest rate, they're charging no fees — unusually competitive or worth scrutinizing. If the spread is large, ask for an itemized fee list before deciding.
Frequently asked questions
Why does my mortgage offer have two different rates?
Federal law requires lenders to disclose both the interest rate and the APR on mortgage offers. The interest rate determines your monthly payment. The APR — which includes origination fees, points, mortgage broker fees, and certain other closing costs — gives you a better total cost comparison tool. When shopping multiple lenders, compare APRs, not just rates.
Does a lower APR always mean a better deal?
Almost always for fixed-rate loans of similar terms. The one exception: if you'll pay the loan off significantly earlier than the full term, the effective cost of upfront fees increases, which can flip the comparison. A loan with higher fees but a meaningfully lower rate might win over a 30-year period but lose over a 5-year period. Run the numbers at your realistic payoff horizon.