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APR Calculator – True Annual Cost of a Loan

The interest rate on a loan tells you the annual cost of borrowing the principal, but it doesn't tell the whole story. Origination fees, discount points, mortgage insurance, and closing costs all add to the real cost of the loan. The Annual Percentage Rate (APR) incorporates these additional costs into a single annual figure, making it the most accurate metric for comparing competing loan offers.

This APR calculator converts a loan's interest rate plus all associated fees into a true APR. Enter the loan amount, interest rate, term, and any one-time fees to see the effective APR and compare it meaningfully against other offers.

How to use the Apr Calculator

Enter the loan amount.

Enter the stated interest rate.

Enter the loan term in months or years.

Add all upfront fees (origination fee, points, closing costs).

View the true APR and compare against other loan offers.

Comparing APR vs Interest Rate: $300,000 Mortgage
Lender	Rate	Upfront Fees	APR	Better for Short-Term?	Better Long-Term?
Lender A	6.5%	$3,000	6.68%	Yes (lower fees)	No
Lender B	6.25%	$8,000	6.60%	No	Yes (lower APR)

Apr Calculator FAQ

Why is APR higher than the stated interest rate?

APR spreads the upfront fees (origination, points, closing costs) across the loan term, adding them to the effective annual cost. The more fees a loan has, the larger the gap between rate and APR.

Should I always pick the loan with the lowest APR?

Not always. APR assumes you keep the loan for its full term. If you'll sell or refinance within a few years, a loan with higher fees but a lower rate may cost more than one with low fees and a slightly higher rate.

What is a discount point?

One discount point = 1% of the loan amount paid upfront in exchange for a lower interest rate. Whether buying points makes sense depends on how long you'll keep the loan — calculate the break-even month to decide.

Is APR used the same way for credit cards?

Credit card APR is simpler — it's the annual rate with no fees folded in (fees are disclosed separately). For instalment loans, APR includes fees; for cards, it typically doesn't.