APR Calculator
The annual percentage rate (APR) bundles interest and qualifying fees into a single comparison number. Use this calculator to see how a fee changes the effective rate above the lender's quoted interest rate.
True APR
13.56%
Above stated rate
+356 bps
Monthly payment
$322.67
Total cost of credit
$2,116.19
Why APR differs from interest rate
The interest rate is the cost of borrowing the principal — the number used to compute each month's interest charge. APR is broader: it converts upfront fees and certain other costs into an equivalent annual rate so two offers with different fee structures can be compared apples-to-apples.
Federal Regulation Z (which implements the Truth in Lending Act) requires lenders to disclose APR for closed-end consumer credit. The standard method is actuarial: solve for the rate at which the present value of all scheduled payments equals the amount the borrower actually receives, after qualifying fees are deducted. That is the math this calculator runs.
Most personal loans charge an origination fee deducted from the disbursed amount — borrow $10,000 with a $500 fee and you get $9,500. The repayment schedule is still based on the full $10,000 at the stated rate, so the effective rate is higher than the stated rate. A $500 fee on a 3-year $10,000 loan at 10% stated raises the APR by roughly 350 basis points (about 3.5 percentage points).
When comparing offers, compare APRs and totals, not stated interest rates. A lender advertising a lower interest rate but higher origination fee can be more expensive than one with a higher rate and no fee.
FAQs
Why does the law require APR disclosure?
Before APR rules, lenders could advertise low interest rates while hiding cost in fees. APR forces every lender to express total qualifying cost as a single rate, so consumers can compare offers without doing the math by hand.
Are all fees included in APR?
No. Reg Z defines which fees qualify (origination, points, certain mandatory closing fees) and which don't (most third-party fees a borrower would pay regardless of the lender, like appraisal or recording). Late fees and prepayment penalties are not in the APR calculation.
What's a basis point?
One hundredth of a percentage point. A change from 10.00% to 10.50% is 50 basis points (bps). Lenders and analysts use basis points to talk about small rate differences without ambiguity.
Can a lender quote a different APR than this calculator returns?
Yes. Lenders may include different fees in their disclosed APR depending on Reg Z interpretation and product structure. This calculator implements the standard actuarial method assuming the only qualifying fee is the value you enter.
How does APR change if I prepay?
The disclosed APR assumes you pay on schedule for the full term. Prepaying lowers your effective cost — the front-loaded interest you would have paid never accrues — but the lender's disclosed APR doesn't recalculate.
Estimates only. Results assume fixed APR and equal monthly payments. Actual lender offers may differ. BankMinistry is not a lender — approval, rates, and terms are determined by lending partners. Not financial advice.