APR Calculator
Effective APR on a loan once upfront fees are included.
Input sheet
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The advertised rate on a loan isn't the whole cost — upfront fees raise what you effectively pay. APR folds those fees in, giving a truer comparison figure than the note rate alone.
How it works
Finds the rate at which the payments' present value equals the amount you actually receive (loan minus fees), then annualizes it.
The note rate is the interest charged on the balance; APR also accounts for upfront fees by treating them as part of the borrowing cost. This calculator finds the rate at which the loan payments' present value equals the money you actually receive — the loan amount minus the fees — then annualizes it. Because fees are baked in, APR always comes out above the note rate.
APR is the number designed for shopping. Two loans with the same note rate can have very different APRs if one charges higher origination fees or points, and the loan with the lower APR is the cheaper one to carry to term.
APR = the annualized rate at which the present value of all payments equals (loan amount − upfront fees)
Worked examples
$20,000 loan, 6% note rate, $600 in fees, 5-year term → ≈ 7.3% effective APR
The $600 in fees means you effectively receive $19,400 but repay as if on $20,000, lifting the effective APR to roughly 7.3% — above the 6% note rate.
Tips & gotchas
- Compare loans by APR, not the headline note rate — APR is what captures the fees that the advertised rate hides.
- APR assumes you keep the loan to term; if you'll pay it off or refinance early, the upfront fees weigh more heavily and the effective cost is higher than the quoted APR.
- Watch for points and origination fees on mortgages — paying points lowers the rate but raises upfront cost, a trade-off APR helps you evaluate.
- For loans with no fees, APR and the note rate are identical; the gap between them is a direct measure of how much the fees cost you.
FAQ
Why is APR higher than the interest rate?
Because APR includes upfront fees as part of the cost of borrowing. You receive less than the full loan amount (after fees) but repay on the full amount, which raises the effective annual rate above the note rate.
Is the loan with the lowest APR always best?
Usually, if you keep it to term. But APR assumes the full term — if you'll pay off early, a loan with lower fees and a slightly higher rate can cost less. Match the comparison to how long you'll actually hold the loan.
What fees count toward APR?
Upfront finance charges such as origination fees, points, and certain closing costs. Enter the total of those fees so the effective APR reflects your real cost.
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