APR Calculator: Find the True Cost of a Loan

Four inputs describe the loan; the calculator does the payment maths and the APR solving in one step.

Step by step

1. Enter the loan amount. The full sum borrowed, before any fees are deducted.
2. Enter the upfront fees. Arrangement, origination or points charges — everything the lender takes up front. Enter 0 if there are none.
3. Enter the nominal annual rate as a percent. This is the rate in the loan's headline offer.
4. Enter the term in years and press Calculate. You get the APR, the monthly payment, and the total cost of borrowing.

Compare offers by entering each one's numbers in turn — the APR lets you rank them on a single, like-for-like figure.

The nominal (headline) rate prices only the interest on the balance. APR folds the upfront cost of getting the loan into one yearly figure, which is why it is almost always higher — and why regulators in many countries require lenders to disclose it.

The US Consumer Financial Protection Bureau explains the difference between a mortgage interest rate and APR with the same distinction: the rate is the cost of borrowing the principal, while APR reflects the rate plus certain fees.

Fees shrink the amount you actually receive while the payments stay the same — you are paying full-price instalments on discounted proceeds, which can only mean a higher effective rate. The chart below shows the effect on a $100,000 loan at 6% nominal over 30 years: $5,000 of fees lifts the APR well above the headline rate.

This is also why a lower headline rate is not automatically the cheaper loan. Compare these two $100,000, 30-year offers:

Loan B looks cheaper every month, yet its APR is higher: the $4,000 fee outweighs the rate cut. To see every payment behind either APR, run the same numbers through a loan calculator for the full amortisation schedule.

• It assumes the full term. Repay early or refinance and the fees are spread over fewer years, so the effective rate you actually paid differs from the quoted APR.
• It assumes on-time payments. Late fees and penalties are excluded from APR by definition.
• It struggles with variable rates. If the nominal rate can change, the APR is computed on the initial rate and may not reflect what you end up paying.
• It excludes some costs. Appraisal or legal fees paid to third parties are often outside the APR, depending on jurisdiction.

For home loans specifically, there are costs APR never tries to capture — property taxes, homeowner's insurance and PMI. A mortgage calculator adds those to the monthly payment so you see the full housing cost, not just the financing cost.