Calculate annual percentage rate to compare true loan cost.
APR is designed to show the broader borrowing cost beyond the nominal interest rate. It incorporates interest plus certain lender fees so competing offers can be compared on a more equal basis.
Borrowers often focus on payment size, but APR can reveal hidden cost differences between loans with similar advertised rates. This is useful for personal loans, mortgages, and auto financing.
Because fee treatment can vary by product and regulation, always validate your final numbers with official lender disclosures.
Input the amount borrowed before fees.
Use the stated annual rate from the lender.
Provide total months or years of repayment.
Include origination and financed mandatory costs.
Solve for effective annual borrowing rate.
Use APR differences to evaluate true cost.
APR is the annualized rate that equates net loan proceeds to discounted payment stream
APR is solved as an internal-rate style value where borrower net proceeds (loan minus financed fees) equal the present value of all required payments over the loan term.
Solve APR for each offer with identical principal and term
Higher financed fees raise APR even when nominal rates match.
Recompute APR impact with same fee amount
Fees weigh more heavily in shorter-term borrowing.
APR closely tracks nominal rate when finance charges are minimal
Useful benchmark for interpreting lender fee impact.