APR Calculator
Your interest rate isn't the whole story. See the real effective rate (APR) once fees are factored into a loan.
Built and maintained by Jefferson Almeida · Last updated
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Effective APR
APR vs. interest rate - the difference that costs money
The interest rate is the cost of borrowing the principal. The APR includes the interest rate plus fees, expressed as an annualized percentage. APR is the more honest number, and it's why the Truth in Lending Act requires lenders to disclose it.
A mortgage advertised at 6.5% with $6,000 in origination fees, points, and closing costs might carry an APR of 6.75%. Two lenders quoting identical 6.5% rates can differ meaningfully once fees are included - comparing APRs surfaces that immediately.
The same gap shows up on a car loan, where dealer fees are usually financed rather than paid upfront; the auto loan calculator turns an APR into the monthly payment and the total interest behind it.
What's included
Typically included: origination fees, discount points, mortgage broker fees, most closing costs, mortgage insurance.
Typically excluded: appraisal fees, title insurance, credit report fees, home inspection, notary, recording fees.
Because the excluded list isn't trivial, APR narrows the gap between quotes but doesn't close it entirely. Ask for a full fee itemization regardless.
Where APR is misleading
Short-term loans. Annualizing a two-week fee produces enormous numbers. A payday loan charging $15 per $100 for 14 days carries an APR near 391% - mathematically correct, and a genuinely useful warning, though the framing surprises people.
Loans you won't hold to term. Mortgage APR assumes you keep the loan for the full 30 years. The average homeowner moves or refinances within about a decade. Paying points to buy down a rate looks better in the APR than it may prove in practice, because you paid the fees upfront and left before recouping them.
0% intro offers. A card at 0% for 18 months then 26% shows a low or zero introductory APR that says nothing about the go-to rate. If you are moving a balance onto one, the debt payoff calculator will tell you whether you can clear it before the promotional window closes.
APR vs. APY
Related and frequently confused:
- APR - annualized rate without compounding. Used for borrowing.
- APY - annualized rate with compounding. Used for savings.
A savings account at 5% APR compounded monthly has an APY of about 5.12%. Lenders quote APR (lower, looks better for a loan); banks quote APY (higher, looks better for a deposit). Both are chosen to flatter.
FAQ
Should I compare loans by interest rate or APR?
APR is the better apples-to-apples comparison when loans have different fee structures, since it captures the total cost of borrowing, not just the interest.
Does a lower APR always mean a better loan?
Usually, but not always - APR calculations can treat one-time costs differently between lenders, and a loan you plan to pay off early may make upfront fees weigh more heavily than APR alone suggests.
Why is my credit card APR variable?
Most are tied to the prime rate and adjust when the Federal Reserve changes rates.
Can I negotiate an APR?
Sometimes. Credit card issuers occasionally lower rates for customers with good payment history who ask. On loans, a competing pre-approval is the strongest lever you have.
Source: Truth in Lending Act (15 U.S.C. § 1601 et seq.).
💡 Did you know?
Before 1968, lenders could quote loan costs however they wanted - add-on rates, discount rates, flat fees - making it nearly impossible to compare two loans honestly. The Truth in Lending Act, signed by President Lyndon B. Johnson in 1968 after roughly eight years of Congressional debate, created the standardized APR figure specifically so borrowers could finally compare offers apples-to-apples.