APR Calculator
Calculate Annual Percentage Rate and compare true loan costs including fees
APR Calculator
Calculate Annual Percentage Rate and compare true loan costs including fees
Loan Details
Fees and Costs
Understanding APR
Annual Percentage Rate (APR) represents the true annual cost of borrowing money, including both the interest rate and all associated fees. Unlike the nominal interest rate, APR provides a complete picture of what you'll pay for a loan.
APR vs Interest Rate
- Interest Rate: The cost of borrowing the principal loan amount
- APR: Interest rate plus fees, expressed as an annual percentage
- Effective Rate: The actual rate considering compounding frequency
- Nominal Rate: The stated interest rate without compounding effects
Types of APR
- Fixed APR: Rate remains constant throughout the loan term
- Variable APR: Rate can change based on market conditions
- Promotional APR: Temporary low rate for a specific period
- Purchase APR: Rate for new purchases on credit cards
- Balance Transfer APR: Rate for transferred balances
APR Calculation Components
Included in APR
- • Interest charges
- • Origination fees
- • Processing fees
- • Discount points
- • Mortgage broker fees
- • Private mortgage insurance (PMI)
- • Prepaid finance charges
Not Included in APR
- • Appraisal fees
- • Credit report fees
- • Title search and insurance
- • Attorney fees
- • Document preparation fees
- • Late payment fees
- • Prepayment penalties
APR by Loan Type
Mortgages
- • Typical APR: 3-8%
- • Includes origination fees
- • Discount points affect APR
- • PMI may be included
- • 30-year term standard
Auto Loans
- • Typical APR: 3-10%
- • New cars get better rates
- • Dealer financing vs banks
- • Credit score impact
- • 3-7 year terms common
Credit Cards
- • Typical APR: 15-25%
- • Variable rates common
- • Promotional 0% APR offers
- • Different APRs for purchases/cash
- • No fixed term
Using APR for Loan Comparison
Why APR Matters
- • Standardized way to compare loans
- • Required disclosure by law
- • Reveals hidden costs
- • Helps identify predatory lending
- • Essential for informed decisions
Comparison Tips
- • Compare APRs for same loan terms
- • Consider both rate and fees
- • Look beyond promotional rates
- • Factor in your time horizon
- • Consider prepayment flexibility
APR Calculation Methods
APR Formula
APR = ((Interest + Fees) / Loan Amount) / Term × 365 × 100
Simplified formula for basic calculations
Precise APR Calculation
Net Loan Amount = PMT × [(1 - (1 + APR/12)^-n) / (APR/12)]
Uses iterative methods (Newton-Raphson)
Effective Annual Rate
EAR = (1 + nominal rate / n)^n - 1
Where n = compounding periods per year
Daily Periodic Rate
Daily Rate = APR / 365
Used for credit card interest calculations
Frequently Asked Questions
Why is APR higher than the interest rate?
APR includes all loan costs (fees, points, insurance) spread over the loan term, while the interest rate only reflects the cost of borrowing the principal. The more fees involved, the bigger the difference.
Is a lower APR always better?
Generally yes, but consider your specific situation. If you plan to pay off the loan early, a loan with higher APR but lower upfront fees might be better. Also consider loan terms and flexibility.
How accurate is APR for comparison?
APR is excellent for comparing loans with similar terms and structures. However, it assumes you hold the loan for its full term. If you plan to refinance or pay early, the actual cost may differ.
What about variable APR loans?
Variable APR loans show the current rate, which can change. Compare the initial rate, understand rate caps and adjustment frequency, and consider how rate changes might affect your budget.