APR Calculator
Roll upfront fees and closing costs into your loan to find the effective APR, or reverse a quoted APR back to the note rate behind it.
Fees are treated as prepaid finance charges: they come out of the loan proceeds before the money reaches you, which is how Regulation Z computes APR.
Assumes a fixed-rate, fully amortizing loan with monthly payments and no prepayment. Mortgage APRs from lenders may also include mortgage insurance and certain third-party fees.
APR vs interest rate: what fees do to your loan
The note rate on your loan sets the monthly payment, full stop. But when a lender charges origination fees, discount points or other prepaid finance charges, you do not actually receive the full loan amount. On a $300,000 mortgage with $6,000 in fees, only $294,000 of value reaches you, yet your payment is sized on $300,000. Paying $1,798.65 a month for the privilege of receiving $294,000 is a worse deal than the 6% note rate advertises, and the APR captures that: it is the rate at which the present value of your 360 payments exactly equals the $294,000 you actually got, roughly 6.19% here.
There is no tidy formula for APR because the equation can only be solved numerically. This calculator uses bisection: it brackets the true rate, then halves the bracket around 200 times until the present value of the payment stream matches the net proceeds to many decimal places. Mode B runs the same search inside another search, finding the note rate that would produce a quoted APR for the given fees.
Why the Truth in Lending Act makes lenders quote APR
Before the Truth in Lending Act (implemented through Regulation Z), lenders could advertise a low interest rate and quietly recover the difference in fees, making comparison shopping nearly impossible. TILA forces every consumer credit offer to disclose a standardized APR so that a 6% loan with $6,000 in fees and a 6.2% loan with no fees can be compared on one number. When two loans share the same term, the lower APR is the cheaper credit.
Two caveats matter in practice. First, APR assumes you keep the loan for the full term; if you sell or refinance in five years, the upfront fees are spread over far fewer payments, so a low-fee, slightly-higher-rate loan can win. Second, compare APRs only within the same term length, because a 15-year loan amortizes fees over half as many years as a 30-year loan and its APR reacts differently to the same closing costs.
Frequently asked questions
What is the difference between APR and interest rate?
The interest rate is the cost of borrowing the principal and sets your monthly payment. The APR folds upfront fees into the cost of credit and expresses the total as a yearly rate, so it is always equal to or higher than the interest rate when fees are present.
How is APR calculated on a loan with fees?
Size the payment from the loan amount and note rate, subtract fees to get net proceeds, then find the rate where the present value of all payments equals those proceeds. It requires iteration; this tool solves it with a bisection search.
Why does the Truth in Lending Act require APR disclosure?
TILA (Regulation Z) standardizes APR so borrowers can compare loans on equal footing. Without it, lenders could hide true costs in fees and points behind an attractive note rate.
Is a lower APR always the better loan?
Not always. APR assumes you keep the loan for the full term. If you will sell or refinance soon, lower upfront fees can beat a lower APR. And only compare APRs across loans of the same term.
Is this APR calculator free?
Yes. Free, no sign-up, and every calculation runs locally in your browser. Nothing you type is uploaded.