APR Calculator

The interest rate on a loan determines how much interest you’ll pay, but it doesn’t account for fees and other charges that you also owe. When comparing loan offers, it’s best to use the annual percentage rate (APR) to get the true cost of your loan.

A loan APR includes financing charges to determine your annualized cost of taking out a loan. As a result, the APR can help you compare two loans with different fees and interest rates.

The information provided is for educational purposes only and should not be construed as financial advice. Experian cannot guarantee the accuracy of the results provided. Your lender may charge other fees which have not been factored in this calculation. These results, based on the information provided by you, represent an estimate and you should consult your own financial advisor regarding your particular needs.

How to Use This Calculator

The APR calculator determines a loan’s APR based on its interest rate, fees and terms. You can use it as you compare offers by entering the following details:

  • Loan amount: How much you plan to borrow.
  • Finance charges: Required fees from the lender, such as an origination fee or mortgage broker fee. Situational fees, such as a late payment fee, generally aren’t included in APR calculations.
  • Interest rate: The interest rate that the lender charges on the loan.
  • Term: The number of years you have to repay the loan.

Often, the Federal Truth in Lending Act requires lenders to tell you the APR, so you won’t have to calculate it on your own. In some cases there are even templates that lenders must use, such as the Loan Estimate form for mortgages. When reviewing that form, you can find the interest rate on the first page and the loan’s APR on page three.

However, if you’re comparing loan offers from different lenders, it’s sometimes helpful to look into the details and do the APR calculations on your own. For example, mortgage lenders might be able to exclude certain fees from their APR calculations, and you want to make sure the APRs you're comparing are based on the same financing charges.

What's the Difference Between APR and Interest Rate?

The difference between a loan's APR and its interest rate can depend on the type of financial product.

For installment loans, such as personal, auto, student and mortgage loans, the APR and interest rate may be the same if there are no finance charges. However, if there is a finance charge, such as an origination fee, the APR will be higher than the interest rate because your cost of borrowing is more than the interest charges alone. The difference between the APR and interest rate can also increase if the loan’s term is shorter, as you’ll be repaying the entire finance charge more quickly.

On credit cards, the APR and interest rate are the same because a credit card APR never takes the card’s fees into account. As a result, you may want to compare not only cards’ APRs, but also their annual fees, balance transfer fees, foreign transaction fees and any other fees when deciding on a credit card. Keep in mind that you can generally avoid paying interest on your credit card if you pay off the balance in full every month.

How Is APR Calculated for Loans?

A loan’s APR is calculated by determining how much the loan is going to cost you each year based on its interest rate and finance charges. While the APR will be displayed as a percentage, it’s not a new or different interest rate—it’s a measure that can help you understand the cost of borrowing money given the specific terms.

It’s also important to remember that a loan’s APR can change after you take out the loan. This could be due to a changing interest rate if your loan has a variable or adjustable rate. Or, if you pay off or refinance your loan before the end of its term, the effective APR of that loan may increase.

Improving Your Credit Can Get You Lower Rates

Lenders may offer you a different APR on your loan depending on your creditworthiness and the repayment term you choose. Those applicants with higher credit scores and lower debt-to-income ratios may qualify for lower interest rates and finance charges, leading to a lower APR.

To improve your credit and avoid late payment fees, make all your debt payments on time. Paying down your credit card balances can also help your credit by lowering your credit utilization ratio.

If you need to borrow money now and don’t have time to improve your credit first, you can still compare lenders’ offers to figure out which loan has the lowest APR. Often, you can start by getting prequalified or preapproved for a loan to see your estimated APRs and terms.

All else being equal, the lowest APR may be best. However, keep the big picture in mind before taking out a loan. For example, lenders may offer you a lower rate on shorter-term loans, which can lead to a lower APR but higher monthly payments. If that’s not affordable, the longer-term loan with a higher APR may be best.