APR Calculator
Calculate the true APR of any loan by including origination fees and other upfront costs in the effective rate.
How to use this apr calculator
- 1Enter the loan amount, stated interest rate, and term.
- 2Enter ALL upfront fees: origination fees, discount points, broker fees, mortgage insurance upfront.
- 3The true APR is always higher than the stated rate when fees are present.
- 4Use APR to compare loan offers apples-to-apples — the lender with the lowest APR costs the least overall.
How it's calculated
APR solves for rate i where net proceeds = M × (1−(1+i)^−n) ÷ i. Net proceeds = loan amount − fees.
About the APR Calculator
APR (Annual Percentage Rate) is one of the most important consumer protection tools in financial regulation. Before its mandated disclosure under the Truth in Lending Act, lenders could quote attractive interest rates while burying thousands of dollars in fees, making true cost comparison between lenders nearly impossible.
Today, comparing APR across loan offers remains the simplest way to identify the lowest true cost lender. A loan with a 6.75% rate and $500 in fees may have a lower APR than a loan with a 6.50% rate and $6,000 in fees — despite the higher stated rate. The fees-to-rate trade-off shows up cleanly in APR comparison.
For mortgage shopping specifically, the industry norm of getting three quotes understates the value of broader comparison. Studies by the Consumer Financial Protection Bureau found that getting five mortgage rate quotes saves an average of $3,000 over the life of the loan compared to accepting the first offer. The additional 30 minutes of phone calls or online applications has an extraordinary hourly return. Use APR as the primary comparison metric across all quotes, then verify the underlying fee breakdown to ensure you are comparing similar products.
Frequently asked questions
Why is APR always higher than the interest rate?
APR includes the interest rate plus the annualized cost of all upfront fees spread across the loan term. When you pay $5,000 in origination fees on a $200,000 loan, you effectively received only $195,000 but must repay based on $200,000 plus interest. The APR captures this by calculating the rate at which $195,000 grows to meet all future payments. APR will equal the stated interest rate only if there are zero fees. Federal TILA (Truth in Lending Act) law requires lenders to disclose APR for all consumer loans, making it the legally mandated comparison metric.
Should I always choose the lowest APR loan?
APR is the best single comparison metric for loans you plan to hold to term. However, if you plan to sell or refinance before the loan ends, the break-even analysis of paying fees for a lower rate matters. High-fee, low-rate loans have lower APRs (making them look best) but require staying in the loan long enough to recoup the fees through lower monthly payments. If you plan to sell in 5 years, a no-fee, slightly higher rate loan might cost less than a low-APR loan with $8,000 in points. Always calculate total cost over your expected holding period, not just APR.
What fees are included in APR calculations?
Federal regulation specifies which fees must be included in mortgage APR: origination charges, discount points, mortgage broker fees, mortgage insurance premiums (upfront), and certain other required fees. Not included in APR: appraisal fees, title insurance, attorney fees, recording fees, and escrow prepayments (taxes, insurance). This means APR does not represent the complete cost of closing — you still need to budget separately for non-included closing costs. The APR is standardized to enable rate comparison across lenders, not to represent the full cash needed at closing.