APR calculator

How to use the apr calculator

What it calculates and when to use it

The APR turns a loan’s interest and upfront fees into one comparable yearly rate. Use it to compare loans with different fees and quoted rates.

How to use it, step by step

1. Enter the loan amount, quoted rate and term.
2. Add any points or arrangement fee as a percentage, plus other upfront fees.
3. Compare the APR with the quoted rate.

What each input means

• Quoted rate – The headline interest rate.
• Points or arrangement fee – A percentage of the loan paid at the start.
• Other fees – Fixed fees paid at the start, such as valuation or legal costs.

How to read the results

• APR – Yearly rate on the money you actually receive, monthly rate × 12.
• Effective annual rate – The same rate compounded monthly.
• Money you receive – Loan amount minus upfront fees.

The formula

The monthly payment is calculated on the full loan. The APR is the rate r that makes the present value of those payments equal the net amount received: Net = pmt × (1 − (1 + r)^−n) ÷ r. APR = r × 12 and the effective rate = (1 + r)^12 − 1. It is solved numerically.

A worked example

A 250,000 loan at 6.5% for 30 years with 1% points and 2,500 of fees has a payment of 1,580.17. You receive 245,000, so the APR is about 6.7% and the effective annual rate is about 6.9%.

Assumptions and limits

• The loan runs to full term. If you repay early, fees are spread over fewer months and the real cost is higher.
• Official APR rules vary by country and product.

Common mistakes

• Comparing loans on quoted rate only.
• Forgetting that a lower APR over a long term can still cost more in total interest.

Frequently asked questions

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