APR Calculator

APR calculator for loans: this free APR calculator shows the true yearly cost of borrowing once upfront fees are included. Enter your loan amount, interest rate, term and fees below, and the APR calculator will instantly show your real APR, monthly payment and total cost of borrowing. For more free tools, visit Vault Calculator.

Estimates only. Lenders may follow slightly different rules when they calculate APR, so the number on your loan offer can differ a little.

How this APR calculator works

Enter the loan amount, the interest rate, the term in months and any upfront fees. The APR calculator shows the annual percentage rate (APR), which is the real yearly cost of the loan once fees are counted, together with your monthly payment and total cost. Everything updates the moment you press the button, so you can test different offers in a few seconds.

What is APR?

APR stands for annual percentage rate. It is a standard way to express the cost of a loan as a single yearly percentage. Unlike the plain interest rate, APR also includes the fees you pay to get the loan. You can read more about the definition on Investopedia or in the overview on Wikipedia. In the United States, the Consumer Financial Protection Bureau also publishes guides that help borrowers compare loan offers.

Interest rate vs. APR

The interest rate only tells you the price of the money you borrow. The APR adds the fees to that price, so it is almost always higher than the interest rate. Two loans can have the same interest rate but very different APRs if one charges bigger fees. That is why APR is the better number for comparing offers, and why an APR calculator is so useful before you sign anything.

How the calculation works

Your monthly payment is based on the full loan amount. But if you pay 300 in fees, you effectively receive 300 less than you borrowed, while still making the same payments. The APR calculator finds the yearly rate at which the payments you make equal the smaller amount you actually receive. That rate is the APR. The calculation is repeated many times internally until the result is accurate to a tiny fraction of a percent.

Example

You borrow 10,000 at 8% for 36 months with a 300 fee. The monthly payment is about 313.36 and you pay about 1,281 in interest. With the fee, your APR is about 10.08%, and the total cost of borrowing is about 1,581. With no fee, the APR would be exactly 8%. With a 600 fee, it would rise to about 12.26%. Try these numbers in the APR calculator above and change them to match your own loan.

Why use an APR calculator?

Lenders often advertise a low interest rate and mention fees only in the fine print. An APR calculator removes the guesswork by turning every fee into one comparable percentage. It takes less than a minute, it is free, and it can save you hundreds or even thousands over the life of a loan. It is especially helpful for personal loans, car loans, and any loan with an origination or processing fee.

How to use APR when you shop for a loan

• Compare APR, not just the interest rate. A lower rate with high fees can cost more than a slightly higher rate with no fees.
• Ask what fees are included. Origination, processing and application fees all matter.
• Check the term. A longer term can lower the monthly payment, but you usually pay more interest in total.
• Look at the total cost. The total cost of borrowing shows the bottom line in dollars.
• Run every offer through the APR calculator. Use the same loan amount and term for each lender so the comparison is fair.

Tips for lowering your APR

A higher credit score usually leads to a lower interest rate, so paying down debt and fixing errors on your credit report can help. Ask lenders whether they will reduce or waive fees, because even a small fee reduction lowers the APR. A shorter loan term often comes with a lower rate, and a larger down payment or a co-signer can also improve the offer. After each change, use the APR calculator again to see how much you actually save.

Frequently asked questions

What is a good APR?

It depends on the type of loan, the market and your credit history. Compare offers for the same type of loan and the same term, and choose the lowest APR that fits your budget.

Is APR the same on credit cards?

Credit card APR is a yearly interest rate on unpaid balances and usually does not include fees in the same way. This APR calculator is meant for loans with a fixed term and payment.

Can APR be lower than the interest rate?

Not for a normal loan. With no fees the APR equals the interest rate, and with fees it is higher.

Does a longer term change the APR?

Yes. When fees are spread over a longer term, the APR gets closer to the interest rate. On a short loan, the same fee has a much bigger effect on the APR.

Is this APR calculator accurate?

The APR calculator uses the standard payment formula and finds the exact rate by repeated approximation. Lenders may apply slightly different rules, so always check the APR on your official loan offer. For more calculators, see the Vault Calculator home page.