APR Calculator
The true annual cost of a loan once fees are folded in — not just the headline interest rate.
Your loan
Origination fees, discount points, and other upfront finance charges.
True APR
6.936%
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Last updated: August 6, 2026 · Reviewed by the DoCalc team
What Is APR?
Annual Percentage Rate (APR) is the interest rate plus the upfront cost of getting the loan in the first place, both folded into one annualized number. A loan's interest rate alone only tells you what you'll be charged on the balance — it says nothing about origination fees, discount points, or other charges due at closing. APR exists specifically to make those two loans with different fee structures comparable on a single number.
The Formula
There's no clean algebraic solution for r_apr — it's found numerically (this calculator uses bisection search). Conceptually: your fixed monthly payment is set by the loan's nominal rate, but you actually received less money upfront (loan amount minus fees). APR is the rate that makes that smaller amount, discounted by the same payment stream, mathematically consistent — which is always a bit higher than the nominal rate whenever fees are greater than zero.
Worked Example
A $320,000 loan at a 6.75% nominal rate over 30 years, with $6,000 in fees:
The nominal rate is 6.75%, but because you only actually received $314,000 while paying as if you'd borrowed the full $320,000, the true annualized cost is closer to 6.94%. That roughly 0.19-point gap is the fees, expressed as an ongoing rate rather than a one-time charge.
Reading APR vs. Interest Rate
| Metric | What it reflects |
|---|---|
| Interest rate | What your monthly payment is calculated from |
| APR | Interest rate + upfront fees, annualized |
| Gap between them | Roughly how much the fees are costing you per year, relative to the loan size |
Who Should Use This Calculator
Use it if you're comparing two or more loan offers with different rate/fee combinations and want a single number to judge which is actually cheaper over the full term.
Look past APR if you don't plan to keep the loan for its full term — a loan with a lower rate but higher fees has a higher APR over 30 years, but can still be more expensive than a low-fee option if you refinance or sell in year 3, since you won't be around long enough to "earn back" the fee through the lower rate.
Common Mistakes to Avoid
The most common mistake is comparing loan offers by interest rate alone, missing that a lender advertising the lowest headline rate sometimes buries the cost in points and fees — the loan with the lowest rate is not always the loan with the lowest APR. A second mistake is treating APR as the only factor that matters regardless of how long you'll hold the loan — APR assumes you keep the loan for its entire term, so it understates the real cost of a high-fee loan you exit early, and overstates it for a loan you pay off ahead of schedule.
Worth knowing: in the US, lenders are legally required (under the Truth in Lending Act / Regulation Z) to disclose APR on most consumer loans specifically so you can make this comparison — always check the APR line on a Loan Estimate, not just the rate.
Expert Recommendation
When comparing offers, calculate APR for your actual expected holding period, not just the full loan term — if you expect to refinance or sell within 5-7 years, a lower-fee/higher-rate loan often wins even when its full-term APR looks worse on paper.
Frequently Asked Questions
What is APR?
Annual Percentage Rate (APR) is the true annualized cost of borrowing, combining the interest rate with upfront fees like origination charges, points, and some closing costs, spread across the loan's term.
What's the difference between APR and interest rate?
The interest rate is what your monthly principal & interest payment is calculated from. APR adds upfront fees into that same rate, expressed as if they were spread across the loan — so APR is almost always slightly higher than the nominal interest rate.
Why does a lower rate sometimes have a higher APR?
A loan with a low headline rate but high origination fees or points can end up with a higher APR than a loan with a slightly higher rate but few or no fees — APR is designed specifically to make that comparison possible.
Is APR required to be disclosed?
In the US, Regulation Z (the Truth in Lending Act) requires lenders to disclose APR on most consumer loans, specifically so borrowers can compare offers on an apples-to-apples basis.
Does APR include every fee?
Not always. Fees directly tied to obtaining credit (origination fees, discount points, some closing costs) are typically included. Fees for optional services or third-party costs like appraisal or title insurance are often excluded, varying by loan type and jurisdiction.
Should I compare loans by APR or by monthly payment?
APR is the better comparison tool if you'll hold the loan for its full term, since it reflects total borrowing cost. If you plan to sell, refinance, or pay off the loan early, upfront fees matter proportionally more, and a lower-fee, higher-rate option can end up cheaper.
Is APR the same on every loan type?
No — credit card APR often compounds differently than an installment loan's APR, and mortgage APR calculations follow specific federal formulas. This calculator models a standard installment-loan APR (mortgage, auto, or personal loan style).
Conclusion
Interest rate tells you what a loan costs month to month; APR tells you what it actually costs, fees included, over its full life. Comparing offers by APR — with an eye on how long you'll actually hold the loan — is the closest thing to an apples-to-apples comparison you'll get before signing.