APR Calculator
Calculate the true Annual Percentage Rate on any loan by including upfront fees and closing costs. Compare loan offers side by side to find the best deal based on the total cost of borrowing, not just the stated interest rate.
The Annual Percentage Rate (APR) represents the true annual cost of borrowing money, expressed as a percentage. Unlike the stated interest rate, APR includes origination fees, closing costs, and other charges that add to the cost of the loan. The Truth in Lending Act (TILA) requires lenders to disclose the APR so borrowers can compare offers on equal footing.
APR is calculated by finding the interest rate that would produce the same monthly payment on the net loan amount (principal minus fees) as the stated rate produces on the full principal. This is why APR is always equal to or higher than the stated rate -- the fees effectively increase the cost of borrowing.
When comparing loan offers, always use APR rather than the stated interest rate. A loan with a lower interest rate but high fees may have a higher APR than a loan with a slightly higher rate but lower fees. However, keep in mind that APR assumes you keep the loan for its full term. If you plan to refinance or pay off early, a loan with lower fees and a slightly higher rate may cost less overall.