APR Calculator

Use this APR calculator to calculate the annual percentage rate, understand how loan fees and closing costs affect your true loan cost, and compare loans to find the best deal.

Loan Details

This is the advertised rate before fees are included.

Loan Fees & Closing Costs

Include all lender fees to calculate accurate APR. These fees increase the true loan cost.

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points

One discount point equals 1% of the loan amount paid upfront to reduce the interest rate. Example: 1 point on $250k = $2,500.

Processing fees, underwriting fees, etc.

Understanding Annual Percentage Rate (APR)

💡 What is APR?

APR (Annual Percentage Rate) is the true cost of borrowing expressed as a yearly rate. Unlike the stated interest rate, APR includes all mandatory fees: origination fees, discount points, and lender charges. This makes APR the most accurate way to compare loans.

📈 How Loan Fees Affect APR

Fees have a disproportionate impact on short-term loans. A $2,000 fee on a 3-year loan increases APR significantly more than the same fee on a 30-year mortgage. This is why comparing APR is essential—especially for auto loans and personal loans where fees can dramatically increase the true cost.

🎯 When APR Matters Most

Mortgages: Small APR differences mean thousands in savings over 30 years.
Auto loans: High fees can make a "0% interest" deal more expensive than a low-rate loan.
Personal loans: Origination fees often add 1-5% to the true cost.

💰 Closing Costs in APR

APR includes most closing costs charged by the lender: origination fees, discount points, underwriting fees, and processing charges. However, third-party costs like appraisal fees, title insurance, and recording fees are typically excluded. Always ask lenders which fees are included in their quoted APR.

Frequently Asked Questions

What is a good APR?

A good APR depends on the loan type. For mortgages, under 7% is competitive. For auto loans, under 6% is good. For personal loans, under 10% is solid. Credit cards average 20-25% APR. Always compare multiple offers to find the best rate for your credit profile.

Is APR higher than interest rate?

Yes, APR is almost always higher than the stated interest rate because it includes loan fees, origination fees, and closing costs. The interest rate only reflects the cost of borrowing, while APR shows the true loan cost including all fees spread over the loan term.

Does APR include closing costs?

Yes, APR includes most closing costs such as origination fees, discount points, and lender fees. However, it typically excludes third-party costs like appraisal fees, title insurance, and recording fees. Always ask your lender which fees are included in the quoted APR.

Why is my APR different from my interest rate?

Your APR is higher because it includes the cost of loan fees amortized over the loan term. If you paid $3,000 in fees on a $250,000 loan, the APR accounts for that upfront cost spread over 30 years, making it a more accurate representation of your true borrowing cost.

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