What Is an APR Calculator?
An APR calculator estimates the annual percentage rate of a loan. Unlike the advertised interest rate, APR can include both interest and certain borrowing fees. This provides a clearer estimate of the yearly cost of borrowing.
Two loans can have the same interest rate but different APRs. The loan with higher origination, application or processing fees will normally have a higher APR.
APR vs. Interest Rate
The interest rate determines how much interest is charged on the outstanding loan balance. APR provides a broader estimate by combining the interest rate with eligible borrowing fees.
How the APR Calculator Works
Enter the loan amount
Add the total amount you intend to borrow before any upfront fees are deducted.
Add the interest rate and term
Enter the advertised annual interest rate and the length of the repayment period.
Include upfront fees
Enter eligible origination, application or processing charges required to obtain the loan.
Review the estimated results
The tool calculates the estimated APR, payment amount, interest and total repayment.
APR Calculation Formula
The calculator first determines the scheduled loan payment using the standard amortisation formula:
In this formula, P represents the loan principal, r represents the periodic interest rate and n represents the total number of payments.
The calculator then finds the periodic rate that makes the present value of all scheduled payments equal to the net loan proceeds after upfront fees. That periodic rate is annualised to estimate the APR.
Why APR Matters When Comparing Loans
APR helps borrowers compare loan offers on a more consistent basis. A lower advertised interest rate does not always mean that a loan is cheaper when fees and finance charges are included.
- Compare loans with different interest rates and fees.
- Understand how upfront charges affect borrowing costs.
- Estimate the payment amount and total interest.
- Identify loan offers that may be more expensive than they appear.
Information You Need to Calculate APR
To receive a useful APR estimate, you should have the loan amount, annual interest rate, repayment term, payment frequency and eligible upfront fees.
Review the lender’s loan disclosure before making a decision. Some charges may not be included in the official APR, depending on the loan type and applicable regulations.