# Free online APR calculator

> APR is the total yearly cost of a loan expressed as a percentage, including interest and fees. This calculator converts a nominal rate plus upfront fees into APR so you can.

Convert a nominal interest rate plus lender fees into the true Annual Percentage Rate (APR) so you can compare loan offers on an equal footing.

**Interactive version:** https://onlinecalculator.me/finance/apr/
**Category:** Finance

## How to use

1. Enter the loan amount — the principal you are borrowing.
2. Enter the nominal interest rate from the lender's quote.
3. Add all upfront fees (origination, points, processing).
4. Set the loan term in months.
5. Click **Calculate APR** to see the true annualized cost.

## The formula

The payment is calculated at the nominal rate:

```
Payment = P × r_nom / (1 − (1 + r_nom)^−n)
```

APR is the monthly IRR `m` such that:

```
loanAmount − fees = Σ Payment / (1 + m)^t   for t = 1 to n
```

Then `APR = m × 12`. The calculator finds `m` using binary search.

## Worked example

$200,000 loan, 6.5% nominal rate, $3,000 fees, 360-month term:

- Monthly payment ≈ **$1,264**
- APR ≈ **6.72%** (higher than 6.5% because the $3,000 fee raises the effective cost)

A competing lender offers 6.4% with $5,000 in fees — the APR would be higher, making the first offer better despite its higher nominal rate.

## Notes

- APR is a standardized disclosure figure required by the Truth in Lending Act (Regulation Z) in the US.
- This calculator uses a nominal APR (IRR × 12), not an effective annual rate (EAR). Lenders typically report nominal APR.
- Private mortgage insurance (PMI) and homeowner's insurance are generally excluded from APR; include them only if your lender does.

## Frequently asked questions

### What is the difference between APR and interest rate?

The interest rate only reflects the cost of borrowing the principal. APR adds fees — origination charges, points, mortgage insurance, and similar costs — then expresses the combined cost as an annual rate. Two loans with the same interest rate but different fees will have different APRs.

### How is APR calculated?

The calculator finds the monthly Internal Rate of Return (IRR) such that the present value of all future payments equals the loan amount minus fees. That monthly IRR multiplied by 12 is the APR. Binary search converges on the rate to four decimal places.

### Why does APR matter more for short loans?

Fees are paid upfront but spread over the loan term in the APR calculation. A $3,000 fee on a 5-year loan hits the APR much harder than the same fee on a 30-year loan, because there are fewer months over which to amortize the cost.

### Does a lower APR always mean a better deal?

Usually, yes — but compare total cost too. A loan with a lower APR but much shorter term could require much higher monthly payments even if the long-run cost is lower.

## Sources

- [Annual percentage rate — nominal vs. effective APR](https://en.wikipedia.org/wiki/Annual_percentage_rate) — Wikipedia
- [What is the difference between a loan interest rate and the APR?](https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/) — Consumer Financial Protection Bureau

## Related calculators

- [Mortgage calculator](https://onlinecalculator.me/finance/mortgage/) — Monthly payment and amortization schedule for a fixed-rate mortgage.
- [Refinance calculator](https://onlinecalculator.me/finance/refinance/) — See monthly savings and break-even when swapping to a lower rate.
- [Loan calculator](https://onlinecalculator.me/finance/loan/) — Generic installment loan payment for any term and rate.
- [Compound interest calculator](https://onlinecalculator.me/finance/compound-interest/) — How any principal grows with compounding over time.

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