APR Calculator
Find the true annual percentage rate of your loan — including origination fees and upfront costs — so you can compare offers accurately.
Results
Annual Percentage Rate (APR)
8.355%
+0.855% above nominal rate due to fees
Monthly Payment
$500.95
Total Fees
$500
Total Interest
$5,057
Total Cost
$30,557
APR vs. Interest Rate: What's the Difference?
The interest rate is the base cost of borrowing — it determines your monthly payment but ignores upfront fees. The annual percentage rate (APR) is the true cost of the loan expressed as a yearly rate, because it folds in origination fees, points, and other upfront charges alongside interest. Federal law (Regulation Z / Truth in Lending Act) requires lenders to disclose the APR so borrowers can compare loans on equal footing.
The APR is calculated by finding the interest rate r that satisfies the standard amortization equation when applied to the loan amount net of fees. In other words, if you borrow $25,000 but pay $500 in origination fees, the APR treats you as if you received only $24,500 but still owe the full payment stream. The formula the lender solves is , where M is your monthly payment, P is the loan amount, F is total upfront fees, r is the monthly APR, and n is the number of payments.
Because fees are spread over the life of the loan, their impact on APR shrinks as the term lengthens. A $500 origination fee on a 1-year $10,000 loan adds roughly 1% to the APR. The same fee on a 5-year loan adds only about 0.2%. This is why short-term loans with fees can carry surprisingly high APRs even at low stated rates — and why comparing APRs is especially important for short-term personal loans and car loans.
When comparing two loan offers, always compare APRs — not interest rates. A loan advertised at 6.9% with a $1,000 origination fee on a 3-year $20,000 loan has an APR of about 8.9%. A competing offer at 7.5% with no fees has a lower APR and is actually cheaper. The APR tells the whole story; the interest rate alone does not.
Frequently Asked Questions
What fees are included in APR?
For mortgages, APR typically includes origination fees, discount points, mortgage broker fees, and certain closing costs, but NOT title insurance, appraisal, or prepaid items like homeowner's insurance. For personal loans, APR usually includes origination fees and mandatory processing fees. Optional fees (like late payment penalties) are not included. Always ask your lender exactly which fees are reflected in the APR they quote.
Is a lower APR always better?
Usually yes, but not always. If you plan to pay off the loan early, a loan with a slightly higher rate but lower or no fees may cost less in practice, because you won't have enough time to amortize the fee savings. For example, if you refinance or sell within 3 years, a no-fee 7% mortgage may beat a 6.5% mortgage with 2 points, even though the APR on the 6.5% loan is lower over 30 years.
What is a good APR for a personal loan?
Personal loan APRs range from about 7% for borrowers with excellent credit (750+) to over 30% for subprime borrowers. As of 2025, average personal loan APRs run 12–16% for good-credit applicants. Credit unions often offer lower APRs than banks or online lenders. A rate below 10% is generally considered excellent; above 20% warrants shopping for alternatives.
How does APR differ from APY?
APR (annual percentage rate) is the simple annual rate without accounting for compounding within the year. APY (annual percentage yield) includes the effect of intra-year compounding — so it's always equal to or higher than APR. Credit card interest is quoted as APR but compounded daily, so the true cost is the APY. For savings accounts and CDs, APY is the number to compare because it reflects actual earnings after compounding.