Quick answer: A $250,000 loan at 6.5% for 30 years with $5,000 in fees has a true APR of 6.695%, not 6.5%. The APR folds fees into the rate so you can compare lenders fairly. Enter your loan amount, rate, term, and fees above to see your real cost.
Last reviewed: October 2026
Key facts
- APR is always higher than the interest rate when a loan has upfront fees or points.
- APR = the rate that makes your payments equal the amount you actually receive (loan minus fees), annualized.
- Comparing APRs only works for identical loan terms; a 15-year and 30-year APR are not comparable.
- Points (prepaid interest) lower your rate but raise your APR if you sell or refinance early.
An APR calculator reveals the true yearly cost of a loan by folding fees and points into the interest rate. Enter your loan amount, rate, term, and upfront charges to see your real APR, monthly payment, and total cost, so you can compare competing loan offers on equal footing.
Two lenders can quote the same 6.5% rate while charging wildly different fees, and the monthly payment alone will not show you the difference. The annual percentage rate exists for exactly this reason: federal law requires lenders to disclose it so borrowers can compare the real cost of credit. This free tool computes your true APR in one step, with no signup.
How to use the APR calculator
- Enter the loan amount, the total you are borrowing before fees.
- Enter the quoted interest rate (the note rate on the loan).
- Enter the loan term in years.
- Enter fees and points in dollars: origination fees, discount points, and lender charges (not third-party costs like appraisals in most cases).
- Click Calculate to see your APR, monthly payment, and total cost.
APR calculator formula: the true cost of a loan
First the calculator finds your monthly payment from the quoted rate with the standard amortization formula. Then it asks: at what monthly rate r would those same payments exactly repay the amount financed (loan amount minus upfront fees)? That rate, multiplied by 12, is your APR. Because fees shrink the amount you effectively receive while payments stay the same, the APR always comes out above the quoted rate whenever fees are positive. With zero fees, APR equals the interest rate exactly.
One subtlety: APR spreads one-time fees evenly across the full loan term. If you sell or refinance after 7 years on a 30-year loan, your effective cost is higher than the disclosed APR, because the fees were paid up front. Keep your expected time in the loan in mind when points are involved.
Worked examples
Example 1: $250,000 mortgage, 6.5%, 30 years, $5,000 fees
Monthly rate = 0.065/12 = 0.0054167, n = 360. Payment = 250,000 x 0.0054167 / (1 - 1.0054167^-360) = $1,580.17. Amount financed = 250,000 - 5,000 = $245,000. Solving 245,000 = 1,580.17 x (1 - (1+r)^-360)/r gives r = 0.5579% per month, so APR = 6.695%. Total cost = 1,580.17 x 360 + 5,000 = $573,861.
Example 2: $35,000 auto loan, 7%, 5 years, $800 fees
Monthly rate = 0.07/12 = 0.0058333, n = 60. Payment = 35,000 x 0.0058333 / (1 - 1.0058333^-60) = $693.04. Amount financed = 35,000 - 800 = $34,200. Solving 34,200 = 693.04 x (1 - (1+r)^-60)/r gives r = 0.6646% per month, so APR = 7.975%. Total cost = 693.04 x 60 + 800 = $42,383. Note how the same $800 fee lifts APR far more on a short 5-year loan than $5,000 does on a 30-year loan.
What raises APR: fee reference table
| Fee type | Typical range | Effect on APR |
|---|---|---|
| Origination fee | 0.5-1% of loan | Raises APR; pays the lender for processing |
| Discount points | 1% of loan per point | Raises APR but lowers the note rate and payment |
| Lender processing/underwriting | $300-$1,500 | Small APR lift, mostly on smaller loans |
| Mortgage insurance (upfront) | Varies | Counted in APR when lender-required |
| Appraisal, title, recording | Varies | Often excluded from APR as third-party costs |
Tips for comparing loans with APR
- Compare APRs only across identical terms. A 15-year loan will almost always show a higher APR than a 30-year loan at the same rate, because fees amortize over fewer years.
- Ask for the Loan Estimate. US lenders must provide this standardized form within 3 business days of application; it lists the APR, fees, and total costs in comparable format.
- Run the numbers with and without points. Points lower your payment but raise your break-even time; if you might move in 5 years, zero-point loans often win.
- Watch adjustable-rate APRs. The disclosed APR on an ARM assumes the initial rate lasts the full term, which it will not; compare the margin, caps, and worst-case payment instead.
- Small loans magnify fees. A $1,000 fee on a $20,000 loan moves APR far more than the same fee on a $400,000 loan.
Common mistakes
- Choosing by interest rate alone. The lowest rate with high fees can cost more than a slightly higher rate with no fees.
- Ignoring how long you will keep the loan. APR assumes the full term; early payoff or refinancing changes the real cost.
- Mixing in third-party costs. Appraisal and title fees vary by provider and are usually excluded from APR, so add them separately when budgeting.
- Assuming APR includes everything. It excludes costs like homeowners insurance and property tax escrows.
- Comparing a fixed-rate APR to an ARM APR. They measure different risks; compare fixed to fixed and ARM to ARM.
Frequently asked questions
What is APR on a loan?
APR, or annual percentage rate, is the yearly cost of borrowing expressed as a single percentage. It starts with the interest rate and adds most upfront lender fees and points, so it reflects the true cost of the loan better than the rate alone.
Why is my APR higher than my interest rate?
Because APR includes upfront fees and points that the interest rate ignores. You pay the same monthly payment but effectively receive less money (loan minus fees), so the true yearly cost is higher. With zero fees, APR and the interest rate are identical.
Is a lower APR always the better loan?
Not always. APR assumes you keep the loan for its full term. If you pay 2 points for a lower rate but sell in 4 years, the upfront cost may never pay back. Compare APRs only for identical terms and weigh your expected time in the loan.
Do all lenders calculate APR the same way?
In the US, the Truth in Lending Act standardizes APR disclosure, so lenders follow the same federal formula. Small differences can still appear in which fees each lender counts, so check the itemized fee list on the Loan Estimate.
What is the difference between APR and APY?
APR is the yearly cost of borrowing and does not compound; APY is the yearly return on savings and does compound. A loan quotes APR, a savings account or CD quotes APY. Because of compounding, the same nominal number means more as APY than as APR.
What APR does a loan with no fees have?
Exactly its note rate. A $20,000 loan at 5% for 60 months has a monthly payment of $377.42 and, with no fees, an amount financed of the full $20,000, so the APR solves to 5.00%. Total cost is $377.42 x 60 = $22,645.
How much do $500 in fees raise APR on that same loan?
The payment stays $377.42, but the amount financed drops to $20,000 - $500 = $19,500. Solving $19,500 = $377.42 x (1 - (1+r)-60)/r gives r = 0.5039% per month, so APR = 6.05%. The $500 fee lifts the APR by about 1.05 percentage points, and total cost rises to $377.42 x 60 + $500 = $23,145.
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Sources
- CFPB Ask CFPB: the difference between a mortgage interest rate and an APR
- Consumer Financial Protection Bureau (CFPB): home-buying tools including the Loan Estimate explainer
Key takeaways
- Bookmark this tool before you sign any loan paperwork to compare<>/li>
- APR folds fees into the rate; it is always above the interest rate when fees exist.
- $250,000 at 6.5% for 30 years with $5,000 in fees = 6.695% APR and $573,861 total cost.
- Compare APRs only across identical loan terms, and mind your expected payoff date.
- Points lower payments but raise break-even time; zero-fee loans suit short stays.
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