APR Calculator
Calculate the true Annual Percentage Rate (APR) of a loan including all fees and compare it to the nominal rate.
Calculate the true Annual Percentage Rate of a loan by factoring in origination fees, broker fees, and points, and compare it to the nominal interest rate.
How APR Calculator Works
The nominal interest rate is what your lender uses to calculate your monthly payment, computed with the standard amortization formula. APR, however, is meant to reflect the loan's true annualized cost including upfront fees — origination fees, broker fees, discount points, and similar charges — which effectively means you're paying interest on a loan amount larger than what you actually received in cash.
To solve for APR, the calculator uses Newton-Raphson iteration to find the monthly rate at which the present value of your scheduled payments equals your loan amount minus all fees (your net proceeds) — this rate, annualized, is the APR. Because fees always reduce your net proceeds relative to your repayment obligation, APR is always equal to or higher than the nominal rate.
The gap between your nominal rate and APR is a useful shorthand for how much upfront cost is baked into a loan offer — a wide gap signals high fees relative to the loan size, which matters most on smaller loans or shorter terms where fees represent a larger share of the total cost.
See It In Action
Who Uses APR Calculator and Why
- Comparing two loan offers with different nominal rates and different upfront fees on a true, apples-to-apples basis.
- Checking how much origination fees, broker fees, and discount points actually raise a loan\'s effective annual cost.
- Deciding whether paying points to lower a loan\'s nominal rate is actually worthwhile once the fee\'s effect on APR is accounted for.
- Estimating the total interest cost of a loan alongside its APR to see the full financial picture.
Mistakes to Avoid
- Comparing loan offers by nominal rate alone — a loan with a lower nominal rate but higher fees can have a higher APR, and therefore a higher true cost, than a loan with a slightly higher rate but lower fees.
- Assuming a small dollar fee has the same relative impact on every loan — the same fee amount affects APR far more on a small, short-term loan than on a large, long-term one, since it\'s effectively spread over fewer total payments.
- Treating points purely as a rate discount without weighing their upfront cost — points are prepaid interest, and whether they\'re worthwhile depends on how long you\'ll hold the loan before the lower rate\'s savings outweigh the upfront cost.
Tips for Best Results
- Always use APR, not the nominal rate, to compare competing loan offers — it\'s specifically designed to standardize the comparison by folding in fees.
- For a smaller or shorter-term loan, pay extra attention to the gap between nominal rate and APR, since fixed-dollar fees have an outsized effect on APR at that scale.
Fixing Common Problems
The APR shown is meaningfully higher than the rate my lender advertised. — Lenders often advertise the nominal rate prominently while fees are listed separately in the loan estimate — add up the origination fee, broker fee, and any points, and this calculator\'s APR will reflect their combined effect on the loan\'s true annualized cost.
Terms Explained
Points: Prepaid interest, typically priced at 1% of the loan amount per point, paid upfront in exchange for a lower interest rate.
APR (Annual Percentage Rate): The loan\'s true annualized cost including upfront fees — always equal to or higher than the nominal interest rate whenever fees apply.