APR Calculator
Enter the loan amount, the interest rate, the term in months, an origination fee and any other fees, such as discount points in dollars. The calculator works out the monthly payment at the interest rate. Then it finds the APR, the yearly rate at which those payments repay only the amount you receive after fees. It also shows the total paid and the total cost of credit.
How to use the APR Calculator
- Enter your numbers in the APR Calculator above.
- Press the Calculate APR button to see the result.
- To try other numbers, change any value and press the button again.
The APR calculation
Loan − Fees = M · [(1 − (1 + APR/12)^−n) / (APR/12)]
M is the monthly payment on the full loan amount at the interest rate, n is the term in months and the fees are the origination fee plus the other fees. The calculator searches for the monthly rate that makes the n payments worth the loan minus the fees, then multiplies it by 12. Total paid is M × n plus the fees, and the total cost of credit is the total paid minus the loan amount. The payment, the total paid and the cost of credit are shown to the cent.
Worked example
A $200,000 loan at 6.5% for 360 months with a $2,000 origination fee and $3,000 of other fees has a monthly payment of $1,264.14. Repaying $195,000, the amount left after fees, with those payments works out to an APR of 6.75%. The total paid is $460,088.98 and the total cost of credit is $260,088.98.
Frequently asked questions
Why is APR different from the interest rate?
The interest rate is the yearly cost of borrowing the money and leaves out fees. The CFPB explains that the APR also reflects points, mortgage broker fees and other charges you pay to get the loan, which is why it is usually higher. On a mortgage Loan Estimate, the interest rate is on page 1 and the APR on page 3.
Which fees should I enter?
The charges you pay to get the loan. Put the origination fee in its own field and the rest, such as points and broker fees, under Other Fees. The calculator takes every fee off the loan amount before it finds the APR, so a fee you leave out makes the APR lower than it should be.
What is a discount point?
According to the CFPB, one point equals 1% of the loan amount, so one point on a $200,000 loan is $2,000. Paying points lowers your interest rate, and how much it drops depends on the lender, the kind of loan and the market. To see the effect, run the calculator once at the lower rate with the points in Other Fees and once at the higher rate without them.