This APR calculator converts a loan’s interest rate and upfront fees into the annual percentage rate (APR). APR shows the yearly cost of borrowing including fees, which makes it easier to compare offers.
How APR is calculated
First the monthly payment is found from the loan amount, rate and term. Fees reduce the money you effectively receive, so APR is the rate at which those same payments would repay only the net amount (loan minus fees). The calculator solves for that rate.
Worked example
A $200,000 mortgage at 6.5% for 30 years has a payment of about $1,264.14. With $4,000 in fees and points, the APR is about 6.695%.
Frequently asked questions
Why is APR higher than the interest rate?
Because it spreads the fees over the loan as if they were extra interest. With no fees, APR and the interest rate are the same.
Is a lower APR always better?
Over the full term, usually yes. But APR assumes you keep the loan for the whole term. If you will sell or refinance early, a loan with fewer upfront fees can be cheaper even if its APR is higher.