APR Calculator
The headline rate plus the fees — the effective APR you actually pay.
How this is calculated
It computes the monthly payment at the nominal rate, then finds the single rate on the amount you actually receive (loan minus fees) that produces the same payment. That rate is the effective APR.
Worked example: $10,000 at 6% over 5 years with $300 in fees → an effective APR meaningfully above 6%. The bigger the fees relative to the loan, the wider the gap.
Interest rate and APR are not the same number
The interest rate is what accrues on the balance. The APR is designed to express the total cost of credit as an annual percentage, including fees, so that two offers can be compared honestly. A loan at 9% with a large initiation fee can carry a higher APR than one at 10% with none, and the APR is the figure that reveals it.
This is why advertised rates are close to useless for comparison on their own. Where regulation requires an APR — and most consumer-credit regimes do — it exists specifically to stop lenders competing on a headline rate while recovering the difference in charges.
What is and is not inside the APR
Inclusion rules vary by jurisdiction, which limits cross-border comparison. Typically included: origination or initiation fees, mandatory broker fees, and compulsory insurance where it is a condition of the loan. Typically excluded: optional insurance, late-payment penalties, and charges triggered by your own behaviour. Anything excluded is a real cost that the APR will not show you, so read what the figure covers before trusting it.
APR versus effective annual rate
A nominal APR quoted with monthly compounding is not the same as the effective annual rate you actually pay. At 12% nominal compounded monthly, the effective rate is 12.68%, because interest earns interest within the year. Card providers usually quote the effective figure; some loan advertising quotes the nominal one. On short-term credit the gap can be dramatic — a fee-heavy loan over a few weeks can produce an APR in the hundreds of percent, which is arithmetically correct and the reason such APRs must be disclosed.
Comparing offers properly
Compare APRs only for the same amount over the same term, since fees spread over a shorter term inflate the APR. Then also compare total amount repayable, which is the number that leaves your bank account and is immune to definitional games. If the two measures disagree about which offer is better, something in the fee structure is worth asking about by name.
Frequently asked questions
Why isn’t the APR just the interest rate?
The interest rate drives the payment; the APR folds in compulsory fees to show the true annual cost. A “low rate” with a big origination fee can carry a higher APR than a plainer loan — which is exactly why APR exists as a comparison figure.
How is this worked out?
The payment is computed from the amount and nominal rate, but you actually receive the amount minus fees. The APR is the rate on that smaller received sum that reproduces the same payment — solved by the tool. Compare loans on APR, not the headline rate.