APR Calculator

What is APR?

Annual Percentage Rate (APR) is the yearly cost of a loan expressed as a single percentage, including both the interest rate and upfront fees like origination charges, points, or closing costs. It's designed to give a fuller, more comparable picture of cost than the interest rate alone — whether you're evaluating a personal loan, a car loan, or a credit card.

How APR is calculated

First, the monthly payment is worked out from the loan amount, interest rate, and term. Then, since fees reduce the amount you actually receive without changing what you pay back, this calculator solves for the interest rate that would make that same payment schedule equal the loan amount minus fees — that solved-for rate, annualized, is the APR. There's no simple algebraic formula for this step, so this calculator (like real financial calculators and Truth in Lending disclosures) solves it iteratively.

In the US, Regulation Z (12 CFR 1026.22) defines how lenders compute the disclosed APR, and its Appendix J sets out the actuarial method for fixed-term loans. This calculator follows the same idea for a loan with equal monthly payments. A lender's figure can still differ slightly, because the rules decide which fees count as finance charges and how odd first periods are handled.

If fees are added to the loan instead of paid upfront, you borrow the loan amount plus the fees, pay interest on the larger balance, and still receive only the loan amount. The APR is then solved against that cash in hand. Switch "Fees are" to "Added to loan" to see the effect.

APR vs. interest rate

The interest rate determines your monthly payment. APR is always equal to or higher than the interest rate, since it folds in fees — if a loan has no fees at all, its APR and interest rate are identical. A wide gap between the two usually signals a loan with high upfront costs, which matters most if you plan to pay it off early, since those fees are effectively spread over a shorter time than the lender priced them for.

How APR affects a loan

• Use APR, not just the interest rate, to compare loan offers with different fee structures — it's the closest thing to an apples-to-apples cost comparison.
• A lower APR with a longer term can still cost more in total interest than a higher-APR loan with a shorter term — always check total cost alongside APR.
• For credit cards, APR usually applies per billing cycle to any carried balance, and card APRs typically don't include annual fees the way loan APRs include origination fees.
• Paying a loan off early doesn't lower its APR — the APR reflects the fees amortized over the original term, so early payoff means you paid a higher effective rate than the disclosed APR assumed.

Worked example: a $20,000 loan with a $500 fee

Take a $20,000 five-year (60-month) loan at a 6.5% interest rate with a $500 origination fee. These are the calculator's default inputs, run both ways:

The $500 fee lifts the APR about one percentage point above the 6.5% rate. Financing the fee costs $86.98 more in total because you pay interest on it, yet the APR comes out slightly lower: the same $500 is measured against $20,000 of cash received rather than $19,500. Shorten the same loan to 36 months and the APR rises to 8.213%, because the fee is spread over fewer payments. That's why fees matter most on short loans and on loans you expect to pay off early.

APR vs. APY

APR is a simple annual rate: the monthly rate times 12. APY (annual percentage yield) includes compounding, so it shows what a balance actually grows by in a year: APY = (1 + APR ÷ n)ⁿ − 1, where n is the number of compounding periods per year. A 6.5% APR compounded monthly is a 6.697% APY. A 24% card APR compounded monthly works out to about 26.8% if the balance and its interest are left to grow for a year.

Lenders quote APR on loans and cards, and banks quote APY on savings, so each side shows you the figure that looks better for them. To compare a loan with an investment return, convert both to the same basis. The ROI calculator gives an annualized return you can set against a loan's APY.

Daily periodic rate on credit cards

Most US credit cards charge interest daily. The daily periodic rate is the APR divided by 365 (a few issuers use 360), and your cardholder agreement says which. At a 24% APR that's about 0.0658% a day. Carry a $1,000 average daily balance through a 30-day billing cycle and the interest is roughly $1,000 × 0.000658 × 30 ≈ $19.73. Because the rate applies to the average daily balance, paying part of the balance early in the cycle cuts the interest even before the due date. The hero card above shows the daily rate for whatever APR you enter. To see what share of a payment goes to interest, the percentage calculator is a quick check.

Sources

The formulas on this page come from the published research below. Last updated October 10, 2026. This calculator gives estimates for general information. It isn't medical advice, so check anything important with a qualified professional.

1. Consumer Financial Protection Bureau. Regulation Z, 12 CFR § 1026.22 — Determination of annual percentage rate.Used for: Definition of APR as the cost of credit expressed as a yearly rate, using the actuarial method
2. Consumer Financial Protection Bureau. Regulation Z, Appendix J to Part 1026 — Annual Percentage Rate Computations for Closed-End Credit Transactions.Used for: Actuarial APR computation (unit-period rate × periods per year), solved iteratively