APR Calculator
The Annual Percentage Rate (APR) is a broader measure of the cost of borrowing money than the interest rate. It reflects the interest rate plus other charges like origination fees, closing costs, and points.
Why is APR Important?APR gives you a more complete picture of the cost of a loan, allowing for a better comparison between different loan offers. A loan with a lower interest rate but high fees could have a higher APR than a loan with a higher interest rate but low fees.
There is no direct formula to solve for APR. It is the interest rate for which the present value of all payments equals the actual amount financed (Loan Amount - Fees). This calculator uses an iterative numerical method to solve for the rate in this equation:
$$ \text{Amount Financed} = \sum_{k=1}^{n} \frac{M}{(1+r)^k} $$
Where:
M = Monthly Payment
r = Monthly interest rate (APR / 12)
n = Number of payments
This calculator provides an estimate and is not financial advice. Lenders have specific ways of calculating APR. Always refer to the official Loan Estimate document from your lender for the precise APR.
Understand the true cost of your loan by including fees.