Finance
APR Calculator
Works APR, which includes certain fees and is therefore the comparable figure.
Result
Fees are assumed to be deducted from the advance rather than added to the balance. If your lender adds them to the amount financed instead, put the increased total in the loan amount field and set fees to zero.
Get a Free Business AuditHow the calculation works
The annual percentage rate expresses the cost of borrowing including specified fees, which makes it comparable across offers in a way the interest rate is not. Two loans at the same interest rate with different fees have different APRs, and the APR is the figure a lender is required to disclose for that reason.
What moves the number
- Interest rate and the fees included in the calculation.
- Loan term, which spreads fees differently.
- Which fees are included, which is defined by regulation.
- Whether the rate is fixed or adjustable.
Where this one goes wrong
APR assumes the loan runs to term, which means a borrower who repays early pays the fees over a shorter period and experiences a higher effective cost than the APR suggests. Consider how long you will actually hold it. On an adjustable rate loan the APR also rests on assumptions about future rates, which makes comparing a fixed and an adjustable loan on APR alone unreliable.
Before you quote
- Compare offers on APR rather than interest rate.
- Consider how long you will actually hold the loan.
- Treat APR on adjustable rate loans with caution.
Questions
About this calculator
What is the difference between APR and interest rate?
APR includes specified fees as well as interest, which makes it comparable across offers. Two loans at the same interest rate with different fees have different APRs, and the rate alone does not reveal the difference.
Is a lower APR always better?
Usually, with two caveats: APR assumes the loan runs to term, so early repayment makes a fee-heavy loan more expensive than its APR suggests, and on adjustable rate loans the APR rests on assumptions about future rates.
Is APR the same as APY?
No. APR describes borrowing cost including fees; APY describes a return including the effect of compounding. They appear on opposite sides of a balance sheet and are not comparable figures.
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How to use this calculator
- Loan amount ($). Enter your own figure; the page starts at $50,000.
- Quoted interest rate (%). Enter your own figure; the page starts at 7.5%.
- Term in years. Enter your own figure; the page starts at 5.
- Fees and charges ($). Origination, arrangement, broker and documentation fees.
The result updates as you type, so you can try a figure, see what it does to effective apr, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Loan amount | $50,000 |
| Quoted interest rate | 7.5% |
| Term in years | 5 |
| Fees and charges | $1,500 |
What comes out
| Result | Value |
|---|---|
| Effective APR main result | 8.79% |
| Monthly payment | $1,001.90 |
| Cash you actually receive | $48,500 |
| Total cost of borrowing | $11,614 |
A quoted 7.5% with 1,500 of fees is really an APR of 8.79%. You receive $48,500 but repay based on the full loan amount.
How sensitive the answer is
Holding everything else steady and changing only loan amount, this is what happens to effective apr. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Loan amount ($) | Effective APR |
|---|---|
| $25,000 | 10.14% |
| $37,500 | 9.24% |
| $50,000 example above | 8.79% |
| $75,000 | 8.36% |
| $100,000 | 8.14% |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Loan amount ($)
- A money amount, starting at $50,000.
- Quoted interest rate (%)
- A percentage, between 0 and 100, starting at 7.5%.
- Term in years
- A number, between 0 and 50, starting at 5.
- Fees and charges ($)
- Origination, arrangement, broker and documentation fees.
What the results tell you
| Result | What it is |
|---|---|
| Effective APR | The headline result. A percentage. |
| Monthly payment | A money figure. |
| Cash you actually receive | A money figure. |
| Total cost of borrowing | A money figure. |
Rates and terms move
Loan and interest figures assume the rate and term you enter hold for the whole period. Variable rates, fees rolled into the balance and early-repayment terms all change the real cost.
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