What's the difference between APR and interest rate?

The interest rate is the cost of borrowing the principal. APR includes the interest rate plus fees, expressed as a yearly percentage — it's the total cost of credit.

What fees should I include?

Include any upfront fees that are required to get the loan: origination fees, arrangement fees, broker fees, and closing costs. Don't include optional fees like insurance.

Why is my APR higher than the interest rate?

Because the fees are effectively included in the APR calculation. The more fees you pay on a shorter loan, the bigger the gap.

Is APR the same worldwide?

The definition is similar but the exact method of calculation can vary by country and regulation. This calculator uses the standard EU/US method of discounting payments back to the loan amount net of fees.

APR CALCULATOR

Enter your loan details and fees to see the true Annual Percentage Rate — the real cost of borrowing, calculated in your browser.

Loan Details

Loan Amount ($)

Nominal Interest Rate (%)

Loan Term (months)

Upfront Fees ($)

Origination fees, closing costs, arrangement fees

APR (Annual Percentage Rate)7.13%Nominal rate 5.00% → APR 7.13%

Monthly Payment$188.71

Total Interest$1,322.74

Cost of Credit$1,822.74Interest + Fees

The APR is 2.13 percentage points higher than the nominal rate because the $500 in fees is spread over the life of the loan. The shorter the loan or the higher the fees, the bigger this gap becomes.

How to calculate APR

1
Enter the loan amount and the nominal (stated) interest rate.
2
Enter the loan term in months and any upfront fees (origination fees, closing costs).
3
Read the APR — the true annualised cost of borrowing including fees.
4
Compare the nominal rate vs the APR to see how much fees add to your effective rate.

Questions

What's the difference between APR and interest rate?: The interest rate is the cost of borrowing the principal. APR includes the interest rate plus fees, expressed as a yearly percentage — it's the total cost of credit.
What fees should I include?: Include any upfront fees that are required to get the loan: origination fees, arrangement fees, broker fees, and closing costs. Don't include optional fees like insurance.
Why is my APR higher than the interest rate?: Because the fees are effectively included in the APR calculation. The more fees you pay on a shorter loan, the bigger the gap.
Is APR the same worldwide?: The definition is similar but the exact method of calculation can vary by country and regulation. This calculator uses the standard EU/US method of discounting payments back to the loan amount net of fees.