APR Calculator
0.00% APR
Why APR Is Higher Than Your Interest Rate
The interest rate only reflects the cost of borrowing the principal. APR (Annual Percentage Rate) rolls in upfront lender fees, points, and other closing costs, then re-solves for the rate that would produce your same monthly payment if those fees were spread over the life of the loan. This calculator keeps the monthly payment fixed at the amount your stated interest rate produces, treats the fees as reducing the money you actually receive, and iteratively solves for the rate that equates the present value of that payment stream to the smaller, fee-reduced amount financed. That solved rate is your APR — always slightly higher than the stated rate whenever fees are greater than zero.
APR Assumes You Keep the Loan to Term
Because APR spreads a one-time, fixed dollar cost (the fees) across the full loan term, it understates your true annual cost if you refinance or sell early — the fees get amortized over fewer actual months than assumed. If you expect to move or refinance within a few years, compare loans by their upfront fees and monthly payment directly rather than relying on APR alone. The refinance calculator can help you weigh a break-even timeline against a lower rate.
Use APR to Compare Loans, Not to Predict Your Payment
Your actual monthly payment is always based on the stated interest rate, not the APR — lenders cannot charge you the APR itself. APR exists purely so you can compare the true cost of loans with different fee structures on an apples-to-apples basis. For a full breakdown of principal, interest, taxes, and insurance on a mortgage, see the mortgage calculator.
Frequently Asked Questions
Why is my APR higher than my interest rate?
APR includes upfront lender fees and points on top of the interest rate, then spreads that extra cost over the life of the loan as an equivalent rate. Since fees add cost without changing your loan amount received, APR is always equal to or higher than the stated interest rate whenever fees are greater than zero.
Should I compare loans using APR or the interest rate?
Use APR when comparing loans with different fee structures, since it standardizes the total cost of borrowing into one annual rate. However, if you plan to sell or refinance before the loan term ends, APR can understate your true cost because it assumes the fees are spread over the full term.