APR Calculator
A $20,000 loan with $1,000 in fees at $430/month for 60 months has a 12.8% APR — the true cost above the 12% quoted rate.
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How it works
APR is the annual rate r that makes the present value of your monthly payments exactly equal the amount you actually receive from the lender — the loan amount minus any upfront fees. The calculator solves the standard annuity equation, loan minus fees = monthly payment × (1 − (1 + r/12)^−months) / (r/12), for the monthly rate r using bisection, then multiplies by 12 to annualize it. Because upfront fees shrink what you really borrow while your payment stays fixed, the APR ends up above the rate the lender advertises. That's why two loans with the same monthly payment can have different true costs — the one with higher fees carries a higher APR.
Worked example
You borrow $20,000 at a stated rate of 12%, and the lender charges $1,000 in upfront fees, so you actually receive $19,000. Your payments are $430 per month for 60 months. Solving the annuity equation for the rate gives a monthly rate of about 1.064%, which annualizes to a 12.76% APR — noticeably above the 12% you were quoted. Over the life of the loan you pay 60 × $430 = $25,800 total, of which $5,800 is interest on top of the $20,000 principal.
Assumptions
- Upfront fees: Fees are treated as paid at origination and reduce the net amount financed; recurring, late, or prepayment fees are not included
- Payment timing: Payments are made monthly at the same amount for the full term, as in a standard amortizing loan
- Fixed payment: The rate is solved from the payment you enter; if your payment includes interest-only periods or a balloon, the true APR will differ
- Compounding basis: The main APR is the monthly rate times 12; the effective annual rate shown accounts for monthly compounding
What the result means
The APR is the number to compare when shopping loans — it bakes in fees, so the loan with the lower APR costs you less no matter how the rate is advertised. If the APR is much higher than the quoted rate, the fees are doing the damage; consider a loan with lower origination charges or a slightly higher rate with fewer fees. A higher APR for the same monthly payment simply means more of your money goes to interest and fees over the term.
Frequently asked questions
How is APR different from the interest rate?
The interest rate only covers the cost of borrowing the principal; APR adds mandatory upfront fees, so it is always at or above the stated rate. For the same loan, APR is the truer number to compare across lenders.
How do I calculate APR?
APR is the rate that makes the present value of your monthly payments equal the amount you receive after fees. For a $20,000 loan with $1,000 in fees at $430 per month over 60 months, the APR works out to 12.8%.
What is a good APR for a personal loan?
Personal loan APRs typically range from about 7% for excellent credit to 36% for poor credit, with averages around 11-13%. Any APR at or below the average for your credit tier is competitive.
Does APR include all fees?
APR includes mandatory upfront fees like origination and processing charges. It generally excludes optional costs such as late fees and penalties, and it assumes you keep the loan for the full stated term.
Why is my APR higher than the interest rate?
Because upfront fees are baked into the APR. On a $20,000 loan, $1,000 in fees pushes the APR above the quoted rate — the larger the fees, the wider the gap.
Is a lower APR always better?
Usually yes for loans with the same term and amount, since APR captures fees. But be careful: a 0% promotional APR on a short term followed by a large balloon can end up costing more than a modest APR over a longer term.
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This calculator is an estimate for informational purposes only and is not financial advice. Your actual APR depends on the lender's fee schedule, repayment terms, and local regulations. Consult a financial professional or your lender before taking on debt.