Find the effective annual percentage rate on a loan once upfront fees are factored in, so you can see its true cost.
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How the APR Calculator works
Your interest rate only measures the cost of borrowing the principal itself. But most loans also
charge upfront fees — origination fees, processing fees, and similar charges — that reduce the amount
of money you actually receive while you still repay the full loan amount.
APR (annual percentage rate) accounts for this by finding the rate that makes your scheduled payments
equal in value to what you actually walked away with. That makes APR a more honest number for
comparing loans that charge different fees.
APR is the rate that makes the loan's payment stream equal your net proceeds (loan amount − fees).
When shopping for a loan, always ask for the APR, not just the interest rate. Two loans with the same
stated rate can have very different real costs if one charges significantly higher fees.
Frequently asked questions
The interest rate is just the cost of borrowing the principal, expressed as a yearly percentage. APR (annual percentage rate) also folds in upfront fees, giving you a single number that reflects the loan's true annual cost.
Because APR spreads any upfront fees — like origination or processing fees — across the life of the loan, it's mathematically equivalent to reducing how much money you actually receive while still repaying the full amount. That makes the effective rate higher than the rate on paper.
Most upfront finance charges do, such as origination and processing fees. Some costs — like optional insurance products or costs unrelated to the credit itself — are typically excluded. Check your loan disclosure for the exact fees included in the quoted APR.
APR is generally the better comparison tool because it accounts for fees, giving you a more apples-to-apples view of the total cost between offers with different fee structures. The interest rate alone can make a fee-heavy loan look cheaper than it really is.