What fees are included in APR?

Origination fees, discount points, mortgage broker fees, and most closing costs that are considered finance charges. Not included: appraisal, title insurance, recording fees, and other third-party costs. The exact inclusion varies by loan type, which is why APRs from different loan categories aren't always comparable to each other.

Why is APR less useful for short-term loans?

APR spreads fees over the full loan term. For a 30-year mortgage, origination fees represent a small annual cost. For a 6-month loan with the same fees, APR is dramatically higher even if you're paying the same dollar amount in fees. For short-term loans, compare total cost in dollars rather than APR.

Is a lower APR always better?

In most cases, yes — lower APR means lower total cost for the same loan term. The exception: if you plan to sell or refinance before the loan term ends, high upfront fees (which inflate APR) may matter less if you won't amortize them fully. Calculate total cost to your exit point, not to the end of the full term.

What's the difference between APR and APY?

APR (Annual Percentage Rate) is used for loans and doesn't account for compounding within the year. APY (Annual Percentage Yield) accounts for compounding frequency and is used for savings/investment products. A savings account advertised at 5% APY with monthly compounding has an APR of about 4.89%. They measure the same underlying rate from different perspectives.

🏦Borrowing

APR Calculator: What Is This Loan Actually Costing You Per Year?

What is the true annual cost of this loan?

What This Does

Two loan offers can have identical stated interest rates but wildly different true costs — because fees, points, and other charges aren't always included in the rate you're quoted. The Annual Percentage Rate (APR) is the standardized measure that includes both interest and fees, expressed as a yearly rate. It's the only fair way to compare loans from different lenders. If Lender A offers 6.5% with no fees and Lender B offers 6.2% with 2% in origination fees on a 30-year mortgage, Lender B's APR is actually higher — you'd pay more in total. The stated rate is meaningless without the APR comparison. This calculator takes your loan amount, interest rate, loan term, and any fees to compute the true APR. You'll see the effective annual cost, the monthly payment, total interest paid, and a clear breakdown of what fees contribute to your APR premium above the stated rate. APR is required by the Truth in Lending Act (TILA) for all U.S. consumer loans, so any lender must provide it on request. But understanding how it's calculated — and being able to verify it — puts you in a fundamentally better negotiating position. Use this tool before accepting any loan offer, especially mortgages where origination costs routinely run into thousands of dollars.

When Should You Use This?

→Comparing loan offers from multiple lenders that quote different rates and fees
→Evaluating a mortgage offer and want to verify the lender's stated APR
→Calculating the true cost of a personal loan with origination fees
→Understanding why a lower interest rate offer might actually cost more than a higher rate one
→Shopping for auto financing and want to compare dealer vs. bank vs. credit union offers

Example Scenario

Sofia is comparing two mortgage offers for a $350,000 loan. Lender A: 6.75% rate, $0 fees. Lender B: 6.50% rate, $7,000 in origination fees. Lender B's lower stated rate sounds better — but the APR calculator reveals Lender A's APR is 6.75% while Lender B's APR is 6.82%. Over 30 years, Lender B costs $4,200 more total. Lender A's "higher rate" is actually the better deal. Sofia closes with Lender A.

APR Calculator

True Annual Rate · Fee Impact · Lender Comparison · Break-Even Analysis

Results update in real time as you adjust any input.

Loan Amount

Stated Interest Rate (APR)

30yr mortgage avg: varies by market · increment by 0.125%

Loan Term (months)

30yr = 360 · 15yr = 180 · 5yr = 60 · 7yr = 84

Origination Fee (%)

Discount Points (%)

pts

1 point = 1% of loan · typically ≈ -0.25% rate

Other Fees ($)

Appraisal, title, settlement, recording, etc.

About This Calculator

This APR calculator uses Newton-Raphson iteration to solve for the true Annual Percentage Rate by finding the discount rate at which the present value of all monthly payments equals the net loan amount received (principal minus all upfront fees). Inputs include loan amount, stated interest rate, term in months, origination fee percentage, discount points, and other fixed closing costs. All results update in real time. The APR premium — the difference between APR and the stated rate — quantifies the annualised cost of fees over the full loan term.

The Cost Breakdown tab renders a horizontal bar chart of the three cost components (principal, total interest, total fees), a dual-bar APR vs stated rate comparison, and a line chart showing cumulative cost trajectories for your loan vs a no-fee lender at the same loan amount — with break-even crossover visible. The Lenders tab shows two bar charts: APR by lender type (sorted lowest to highest) and total cost over the full term by lender type, plus a full comparison table with four standard lender archetypes. The Fee Sensitivity tab shows a line chart of APR vs fee amount (from zero to 3× current fees) and a sensitivity table with five scenarios.

Dynamic accent colours reflect fee impact: emerald (Low Fee Impact, APR premium below 0.1%), green (Moderate, below 0.25%), amber (High, below 0.5%), red (Very High, above 0.5% or fees above 3% of principal). A loan score (0–100) penalises large APR premiums and high fee percentages. The four lender comparison scenarios (no-fee, your loan, low-fee, buy-down) let you see whether your current lender's fee structure is competitive. The PDF export includes the lender comparison and fee sensitivity tables.

Results are estimates only and do not constitute financial, tax, or legal advice. Consult a qualified professional before making financial decisions.