APR Calculator
Convert a loan's interest rate plus fees and points into the true APR, see the total finance charge, and how the effective rate jumps if you pay the loan off early.
APR Calculator: with the default inputs, apr is 6.189%.
The rate that sets your payment.
Origination, underwriting, processing and other lender charges — only the ones that count as finance charges.
The rate that amortizes what you actually received (amount − fees) at the same payment.
- Monthly payment
- $1,199.10
- Fees + points
- $4,000
- Amount financed
- $196,000Loan amount minus prepaid finance charges — what you effectively receive.
- Total finance charge
- $235,676All interest plus the fees — the Truth in Lending 'cost of credit'.
- APR minus note rate
- 0.189%
Assumptions
- APR follows the Regulation Z actuarial method: the rate that equates the amount financed with the present value of the level payments, assuming the loan runs to term.
- Only the fees you enter are treated as prepaid finance charges; third-party closing costs are excluded.
- Monthly payments, monthly compounding, no balloon; the early-payoff table uses the balance at the note rate as the payoff amount.
| Keep for | Effective APR | Fees per month kept | Payments + payoff |
|---|---|---|---|
| 3 | 6.752% | $111.11 | $235,336 |
| 5 | 6.484% | $66.67 | $258,055 |
| 7 | 6.371% | $47.62 | $280,003 |
| 10 | 6.289% | $33.33 | $311,264 |
| 30 | 6.189% | $11.11 | $431,676 |
The fees don't change, so spread over fewer months they cost more per month — the effective rate rises the sooner you sell or refinance.
How this is worked out
The formula
Payment M = pmt(P, r/12, n) using the note rate r APR = 12 × q, where q solves pmt(P − F, q, n) = M P = loan amount, F = prepaid finance charges (fees + points), n = months q is found by bisection — there's no closed form. Finance charge = M × n − (P − F)
Open How it’s calculated above to see this worked through with your own numbers.
What you enter
- Loan amount
- A number.in dollars · 0 or more · defaults to 200000
- Interest rate (note rate)
- The rate that sets your payment.a percentage · from 0 to 50 · defaults to 6
- Term
- A number.from 1 to 40 · whole numbers only · defaults to 30
- Upfront fees
- Origination, underwriting, processing and other lender charges — only the ones that count as finance charges.in dollars · 0 or more · defaults to 4000
- Discount points(under More options)
- 1 point = 1% of the loan paid up front.a percentage · from 0 to 10 · defaults to 0
What you get back
- APRmain answer
- The rate that amortizes what you actually received (amount − fees) at the same payment.
- Monthly payment
- Fees + points
- Amount financed
- Loan amount minus prepaid finance charges — what you effectively receive.
- Total finance charge
- All interest plus the fees — the Truth in Lending 'cost of credit'.
- APR minus note rate
What this assumes
- APR follows the Regulation Z actuarial method: the rate that equates the amount financed with the present value of the level payments, assuming the loan runs to term.
- Only the fees you enter are treated as prepaid finance charges; third-party closing costs are excluded.
- Monthly payments, monthly compounding, no balloon; the early-payoff table uses the balance at the note rate as the payoff amount.
About this calculator
The interest rate on a loan sets the payment; the APR tells you what the loan really costs once the lender's fees are counted. Under the Truth in Lending Act the APR is defined precisely: it's the rate that would produce your actual payment if the amount you received — the loan minus prepaid fees and points — were the amount borrowed. Two loans with the same rate but different fees have different APRs, which is why the APR is the number to compare across lenders.
How to use it
Enter the loan amount, the quoted rate, the term, and the upfront fees that are finance charges: origination and application fees, underwriting and processing, mortgage-broker fees, prepaid interest, and (for mortgages) PMI premiums. Third-party items you'd pay regardless of who lends — appraisal, title insurance, recording fees — are generally not finance charges and shouldn't go in. Add discount points under More options if you're buying the rate down.
Reading the results
- APR is the headline. The gap to the note rate is set by the size of the fees relative to the loan and the length of the term.
- Amount financed and total finance charge are the two Truth-in-Lending figures your Loan Estimate or disclosure will show; check that they agree.
- Effective APR by how long you keep the loan is the part most calculators skip. The APR assumes you keep the loan to maturity. If you sell or refinance after five years, the same fees are spread over a fifth as many payments and the true cost is much higher. Compare a low-fee/high-rate loan with a high-fee/low-rate one across the row that matches your plans, not just the last one.
Points
A discount point is 1% of the loan paid up front for a lower rate. Run the loan twice — with points and the lower rate, and without — and compare the APR at the horizon you expect to keep it. Points usually pay off only if you stay well past the break-even, often five to seven years.
What APR doesn't capture
APR treats fees as if spread over the full term and ignores the time value of your own cash. It also can't compare loans of different terms fairly — a 15-year loan with the same APR as a 30-year costs far less in total interest. Use APR to rank lenders offering the same product; use total interest and monthly payment to choose between products.
Frequently asked questions
▸What's the difference between APR and interest rate?
The interest rate is the price of borrowing the principal and sets your payment. APR adds the lender's upfront fees and points, spread over the term, into a single effective rate. With no fees they're identical; with fees the APR is higher.
▸How is APR calculated?
Find the payment from the loan amount and note rate, subtract the prepaid finance charges from the loan to get the amount financed, then solve for the rate that amortizes the amount financed at that same payment. There's no closed formula — it's found numerically, as this calculator does.
▸Which fees count toward APR?
Finance charges: origination, application, underwriting and processing fees, broker fees, discount points, prepaid interest and mortgage insurance. Appraisal, credit report, title, recording and most third-party fees are excluded under Regulation Z.
▸Why does APR go up if I pay the loan off early?
Fees are a fixed cost. The disclosed APR spreads them over the full term; if you refinance or sell after a few years, the same fees are amortized over fewer payments, so the effective rate you actually paid is higher — see the table.
▸Is a lower APR always the better loan?
Only between loans of the same type and term. A loan with low fees and a higher rate can be cheaper than a low-APR loan if you'll refinance or move within a few years, and a shorter-term loan costs less in total even at the same APR.
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