APR Calculator — calculate effective borrowing cost.
APR Calculator
Estimate the effective annual percentage rate and total borrowing cost including fees.
Loan inputs
Borrowing summary
How APR is measured
APR, or annual percentage rate, reflects the true cost of borrowing on an annualized basis. It includes the stated interest rate plus certain lender fees, such as origination charges or closing costs, which can materially raise the effective cost.
Unlike the nominal interest rate alone, APR shows the more realistic borrowing cost to compare loans that have different fee structures and repayment terms. Even when two lenders quote the same nominal rate, the total annualized cost can differ significantly.
When fees are included, the effective borrowing cost is often higher than the stated interest rate. Borrowers should compare APRs across offers rather than focusing only on the monthly payment.
- APR is usually annualized and includes financing charges.
- Higher fees can raise the true cost of a loan even when the rate appears competitive.
- Comparing APRs is more meaningful than comparing only listed interest rates.
- Term length and fees together affect total borrowing cost.
Frequently asked questions
What is APR?
APR is the annualized cost of borrowing, including the stated interest rate and certain fees associated with obtaining the loan.
Why is APR higher than the nominal rate?
Because APR accounts for fees and other financing charges that increase the true borrowing cost beyond the simple interest rate.
Does APR include all costs?
Not always; it depends on the loan type and disclosure rules. This estimate includes fees entered here as part of the effective borrowing cost.
How does term length affect APR?
Longer terms can reduce monthly payments but may increase total interest, while fees can make the effective APR materially higher.
Why compare APRs instead of just interest rates?
APR gives a more accurate apples-to-apples benchmark when loan offers have different fees and structures.
Is this a guaranteed borrowing cost?
No. This is an educational estimate and does not guarantee final lender APR, fees, or approval terms.