APR Calculator

Calculate Annual Percentage Rate to understand the true cost of borrowing. Compare loans and make informed financial decisions.

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years
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Quick Facts

APR vs Interest Rate
APR includes fees
True cost of borrowing
Average Mortgage APR
~6.5% - 7.5%
As of 2024
Credit Card APR
~20% - 25%
Average range
Good APR
Below average
For your loan type

Your Results

Calculated
APR
0%
Annual Percentage Rate
Effective Annual Rate
0%
With compounding
Monthly Payment
$0
Principal + Interest
Total Cost
$0
Total amount paid
Total Interest
$0
Interest + Fees

APR Calculator: Understand the True Cost of Borrowing

The Annual Percentage Rate (APR) is a crucial metric that represents the true cost of borrowing money. Unlike the simple interest rate, APR includes not just the interest charges but also other costs associated with the loan, such as origination fees, closing costs, and other finance charges.

The APR Calculator helps you understand the complete cost of your loan by calculating the effective annual rate that includes all fees and charges. This gives you a more accurate picture of what you'll actually pay over the life of the loan.

Why APR Matters More Than Interest Rate

While the interest rate tells you the cost of borrowing the principal amount, APR gives you the complete picture. Two loans might have the same interest rate but very different APRs due to differences in fees, closing costs, and other charges.

The APR Formula

APR = ((1 + EAR)^(1/n) - 1) x n where EAR = (1 + r/n)^n - 1 and r = nominal interest rate
APR = Annual Percentage Rate | EAR = Effective Annual Rate | r = Nominal Rate | n = Compounding Periods

Key Components of APR

APR includes several components:

  1. Interest Rate - The base cost of borrowing the principal
  2. Origination Fees - Charges for processing the loan
  3. Closing Costs - Various fees associated with finalizing the loan
  4. Other Finance Charges - Any additional costs required to obtain the loan

What's Not Included in APR

APR does not include:

  • Late payment fees
  • Prepayment penalties
  • Credit life insurance
  • Optional services or products

Tips for Lower APR

To secure a lower APR:

  • Improve your credit score
  • Shop around with multiple lenders
  • Negotiate fees and closing costs
  • Consider shorter loan terms
  • Make a larger down payment when possible

APR vs. APY: Understanding the Difference

While APR represents the cost of borrowing, APY (Annual Percentage Yield) represents the return on savings or investments. APY takes into account compound interest, while APR focuses on the cost of borrowing.

  • Use APR when comparing loan offers and understanding borrowing costs
  • Use APY when comparing savings accounts and investment returns

This calculator estimates the APR based on your inputs. Actual rates may vary depending on lender policies and market conditions.