APR Calculator
Compare any two loan offers on equal footing by calculating the true APR that includes all fees and compounding costs the stated rate alone does not reveal.
$
$
years
Enter your values above to see the results.
Tips & Notes
- ✓Always compare loans by APR, not stated rate — APR is the only figure that puts all loans on equal footing by including fees.
- ✓Request the Loan Estimate within 3 business days of application — this legally required document shows APR and all itemized costs.
- ✓Discount points reduce your stated rate but increase effective cost if you sell or refinance before the break-even point — always calculate the payback period.
- ✓For short-hold loans under 3 years, APR matters less than total fees paid since you never benefit from the lower rate long enough to recover upfront costs.
- ✓Credit card APR compounds daily — the effective annual rate is noticeably higher than the stated APR for any balance that carries month to month.
- ✓Payday and short-term loan fees look small per transaction but annualize to 200-400% APR — always calculate the true annual cost before using.
Common Mistakes
- ✗Comparing loans by stated rate instead of APR — a lower stated rate with high fees often costs more total than a higher stated rate with no fees.
- ✗Assuming all APR calculations include the same fees — some lenders exclude certain costs, making cross-lender APR comparisons imperfect without scrutiny.
- ✗Buying discount points without calculating break-even — if you sell in 4 years but break-even is 6 years, points increase your true cost.
- ✗Ignoring compounding frequency — daily compounding at the same stated rate produces a higher effective rate than monthly compounding over time.
- ✗Treating a 0% promotional rate as truly free — deferred interest cards charge retroactive interest from purchase date if not paid in full by the deadline.
- ✗Not asking for the APR on buy-now-pay-later offers — 0% for 12 months with 29% retroactive interest is not 0% APR on any honest calculation.
APR Calculator Overview
The interest rate a lender advertises is almost never the true cost of borrowing. APR — Annual Percentage Rate — is the standardized measure that includes fees, points, and compounding effects. It is the only honest basis for comparing loans across different lenders.
Federal law requires lenders to disclose APR before you sign. When a lender emphasizes the stated rate and buries the APR, the gap between them is almost always large.
What each field means:
- Principal — the loan amount before fees are added
- Fees — all upfront charges: origination fee, points, broker fee, processing costs
- Years — loan term used to annualize the fee impact on the rate
- Compound — how many times per year interest compounds; monthly (12) is most common
What your results mean:
- APR — the true annualized cost including all fees and the compounding effect; use this to compare loans
- Effective Annual Rate — what you actually pay per year after compounding; always higher than the stated rate
Example — $200,000 mortgage at 6.5%, $3,500 in fees:
Stated rate: 6.5% Fees: $3,500 (origination + title + processing) Effective loan received: $196,500 Monthly payment calculated on: $200,000 Solving for APR: approximately 6.73% The 0.23% gap = $13,800 in extra cost over 30 years
EX: Two lenders, same $200,000 loan — which is cheaper? Lender A: 6.75% stated, $0 fees → APR = 6.97% (monthly compounding) Lender B: 6.50% stated, $3,500 fees → APR = 6.73% Lender B is cheaper despite having fees — the lower rate more than offsets the upfront cost. Rule: always compare APR, not stated rate, to find the true cheaper option.
APR vs stated rate — typical gaps by loan type:
| Loan Type | Typical Stated Rate | Typical APR Gap |
|---|---|---|
| 30-year mortgage | 6.75% | +0.15 to +0.35% |
| Auto loan (dealer) | 5.9% | +0.2 to +1.6% |
| Personal loan | 9.0% | +0.5 to +2.5% |
| Payday loan | 15% per 2 weeks | 390% annualized |
Fee impact on APR — $200,000 mortgage at 6.5% / 30 years:
| Upfront Fees | Effective APR | Extra 30yr cost |
|---|---|---|
| $0 | 6.72% | baseline |
| $2,000 | 6.82% | +$6,000 |
| $4,000 | 6.92% | +$12,000 |
| $6,000 | 7.02% | +$18,000 |
APR is most useful when comparing loans you plan to hold to maturity. If you expect to sell or refinance before the full term, a loan with a lower rate but higher fees may actually be more expensive for your specific timeline — the fees are paid once upfront while the rate benefit compounds only over time. For a 3-year hold on a 30-year mortgage, compare total cost over 3 years, not APR over 30.
Frequently Asked Questions
The interest rate determines your monthly payment on the loan principal. APR is broader — it includes the interest rate plus origination fees, points, broker fees, and certain closing costs, expressed as a single annualized percentage. On a $200,000 mortgage at 6.5% with $3,500 in fees, the stated rate is 6.5% but APR is approximately 6.73%. The gap matters because different lenders structure fees differently — APR puts them on equal footing for comparison.
APR is higher because it incorporates fees the interest rate ignores. When you pay an origination fee upfront, it reduces the effective loan amount you receive while payments are calculated on the full principal. This means you pay the same amount on a smaller received sum — equivalent to a higher effective rate. A $2,000 fee on a $200,000 loan means you receive $198,000 but make payments as if you received $200,000, raising the effective APR above the stated rate.
Get the APR in writing from each lender — Truth in Lending disclosures are required before signing. Compare APRs directly for the same loan type and term. Lower APR means lower total cost if you hold the loan to maturity. If you plan to sell or refinance early, a loan with slightly higher APR but lower upfront fees may be cheaper for your specific timeline, since fees are paid once while the rate difference compounds only over the term you actually hold.
Effective Annual Rate (EAR) is what you actually pay per year after accounting for compounding within the year. At 6.5% compounded monthly: EAR = (1 + 0.065/12)12 - 1 = 6.70%. At 6.5% compounded daily: EAR = 6.72%. The difference is small for mortgages but significant for credit cards where 22% nominal APR corresponds to roughly 24.4% EAR when interest compounds daily on carried balances.
For mortgages, APR within 0.3% of the best nationally available rate is competitive. For auto loans, below 6% is strong for qualified buyers. For personal loans, below 10% is favorable; above 18% approaches credit card territory. As a rule: if APR exceeds the expected long-term return on diversified investments (roughly 7-10% historically), you are paying a premium to borrow against future income rather than building wealth from it.
Yes, but differently. APR annualizes costs over the full term — fees become relatively more expensive the shorter you actually hold the loan. A $2,000 fee on a 30-year mortgage is minimal as an annualized cost. The same fee on a loan you pay off in 2 years represents a much higher effective APR. For short payoff horizons, minimize upfront fees even at a slightly higher stated rate. For long hold periods, a lower rate from paying points saves more over time.