APR Calculator
Calculate the true Annual Percentage Rate (APR) of a loan. APR includes fees, giving you the real cost of borrowing.
An 8% loan with a $200 origination fee costs $1,055 of interest on $10,000 — and across a three-year term, fees and interest together are the only cost figures that matter when comparing offers.
Calculator
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What Is APR?
APR (Annual Percentage Rate) reflects the true cost of borrowing by including fees. The nominal rate only covers interest, but APR adds origination fees, closing costs, and other charges.
This calculator estimates APR by adjusting the effective loan amount and computing the rate that produces the same monthly payment.
Worked example
Using the defaults — a $10,000 loan, an 8% nominal rate, a $200 origination fee, over 3 years:
equal the net amount actually advanced
Note the quoted payment. $10,000 at 8% over 36 months carries a payment of $313.36, and total interest of $1,281.
Net out the fee. You receive $10,000 − $200 = $9,800, but the repayment schedule is unchanged. The fee is 2.0% of the principal, paid up front.
Add the fee to the cost, not to the rate. Over the term you pay $1,281 of interest plus $200 of fee = $1,481 of total financing cost. The fee is 13.5% of that cost on a loan where it is only 2% of the principal — short terms make fees disproportionately expensive, because there is less time for interest to amortise them.
Compare the total dollar cost. Total repaid is $313.36 × 36 = $11,281, against $10,000 borrowed, for a loan that costs $1,481 in total. That single figure is the cleanest basis for comparing two offers with different rates and different fees — it needs no assumption about term, and it cannot be gamed by quoting a fee-free rate alongside a fee-bearing one.
Enter 10000, 8, 200 and 3 above to reproduce the payment and total. APR is the regulated disclosure standard under the Truth in Lending Act precisely because it puts fees and rate on one comparable basis; always compare APR to APR, never a rate to an APR.
What each fee level costs in total
The same $10,000 at 8% over 3 years under four fee levels. The fee never changes the interest bill — it sits on top of it.
| Origination fee | Interest paid | Total cost | Fee as % of cost | Total repaid |
|---|---|---|---|---|
| $0 | $1,281 | $1,281 | 0% | $11,281 |
| $200 (default) | $1,281 | $1,481 | 13.5% | $11,281 |
| $500 | $1,281 | $1,781 | 28.1% | $11,281 |
| $1,000 | $1,281 | $2,281 | 43.8% | $11,281 |
Total repaid is identical across all four rows because the fee is paid separately at origination, not financed into the loan. The fee column is therefore pure additional cost: at $1,000, the fee alone is 78% of the interest charged over three years.
Common mistakes with this calculation
- Comparing an APR against a nominal interest rate. A loan advertised at "8% interest" and another at "8.2% APR" are not the same product. The first excludes fees, the second must include them. Comparing the two directly systematically favours whichever lender quoted the unregulated figure.
- Assuming APR matters equally on loans of different lengths. APR spreads the fee across the whole term. On a three-year loan a $200 fee adds modestly to the effective cost. On a three-month loan the same fee annualises to a far larger rate, because there is almost no time for it to be absorbed. For short loans, compare total dollar cost, not APR.
- Ignoring that APR assumes you hold to term. If you repay early, refinance or sell the financed asset, you paid the whole upfront fee for a fraction of the term benefit. Some lenders charge a prepayment penalty on top. APR is calculated on the assumption of full-term repayment.
- Overlooking the fees that are not in the APR. Late fees, returned-payment fees and some third-party charges are excluded from the APR calculation. Read the fee schedule separately; the APR is a floor on cost, not a ceiling.
When this calculator does not apply
- It takes a single origination fee. Real loans carry multiple charges — appraisal, documentation, title, filing — that each belong in the comparison.
- It assumes the loan runs to full term with no early repayment, which is the regulatory convention but not the usual experience.
- It assumes a fixed rate and a fixed payment schedule.
- It does not model variable rates, introductor rates that step up, or payments that change over the term.
- It excludes late fees and returned-payment charges, which are outside the APR definition.
Frequently Asked Questions
Why is APR higher than the interest rate?
APR includes fees (origination, closing costs, etc.) that the interest rate does not. The higher the fees relative to the loan amount, the bigger the gap between rate and APR.
Is APR always the best comparison tool?
APR is good for comparing similar loans, but it assumes you will hold the loan to term. If you plan to refinance or sell early, the effective cost may be higher because fees are paid upfront.
Sources & Methodology
This calculator uses standard financial formulas. See our methodology page for the full formula derivation.
- Truth in Lending Act — Regulation Z Consumer Financial Protection Bureau
- What Is the Difference Between a Loan Rate and an APR? Consumer Financial Protection Bureau
- Loan Estimate Explainer Consumer Financial Protection Bureau
- Consumer Credit Outstanding Federal Reserve
- Consumer Information on Loans Consumer Financial Protection Bureau
Last reviewed .
Key takeaways
- A $200 origination fee on a $10,000 loan at 8% adds $200 to a $1,281 interest bill.
- The fee is 2% of principal but 13.5% of the total financing cost.
- Fees hurt more on shorter terms, because there is less time to absorb them.
- Compare APR to APR. A nominal rate is not a comparable figure.
- APR assumes full-term repayment. If you plan to repay early, compare total dollar costs.