Loan APR calculator
Two loans with the same interest rate can cost very different amounts: fees and mandatory insurance count too. The APR brings them together in a single annual rate so you can compare offers.
Nominal rate against real cost
How a loan's APR is calculated
Enter the loan amount, the interest rate, the term, the arrangement fee and any costs you pay up front or every month. The calculator gives you the payment, the APR and the total cost, and shows how much fees and insurance add to the real cost.
Example: 10,000 at 7% over 48 months means a payment of 239.46. With a 3% arrangement fee you receive 9,700 and the APR rises to 8.58% (an effective annual rate of 8.93%). If mandatory insurance of 15 a month is added, the APR rises to 11.79%.
How it is calculated
- Payment = fixed-payment loan at the interest rate.
- Real monthly rate = the rate that equates what you receive (amount − fee − upfront costs) with what you pay each month (payment + mandatory monthly costs).
- APR (US convention) = monthly rate × 12. Effective annual rate (EU “TAE” convention) = (1 + monthly rate)^12 − 1.
Assumptions
- Equal monthly payments and a fixed rate.
- Each lender calculates the official APR under its country's rules: this calculator helps you understand it and compare offers on the same basis.
Frequently asked questions
What is the difference between the interest rate and the APR?
The interest rate is what is charged on the balance. The APR adds fees and mandatory costs, so it reflects the real cost of borrowing. Use the APR to compare loans.
How much does an arrangement fee add?
More the shorter the loan, because it is spread over fewer payments. In the example, a 3% fee takes the APR from 7% to 8.58%.
What is the effective annual rate?
It compounds the real monthly rate over the year: (1 + monthly rate)^12 − 1. It is how the cost is expressed in the EU (TAE). With the same figures it comes out slightly higher than the APR, which simply multiplies the monthly rate by 12.
Why is the effective rate higher than the interest rate even with no fees?
Because interest is paid monthly. A 7% nominal rate paid monthly is equivalent to 7.23% effective per year.
Will it match the APR my lender quotes?
It should be very close if you enter the same figures, but the official APR is calculated by the lender under its country's rules, which define which costs are included. Use this calculator to understand it and compare offers on the same basis.
Terms used in this calculation
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