What's the real cost of this loan once fees are counted?

Why is APR higher than the interest rate?

The stated interest rate only reflects the cost of borrowing the loan amount itself. APR spreads the loan's fees and closing costs across the same monthly payment stream, which is mathematically equivalent to borrowing a smaller amount — the loan minus fees — at a higher rate to produce that identical payment. This calculator finds exactly that rate: it computes the monthly payment implied by your stated rate on the full loan amount, then solves for the rate that produces the same payment on the loan amount minus fees. The more fees a loan carries, the bigger the gap between the stated rate and the true APR.

What fees are typically included in APR?

Common examples include loan origination fees, discount points, mortgage insurance premiums in some cases, and certain closing costs. What's actually included varies by loan type and jurisdiction's regulations, so always check your specific loan estimate or Truth in Lending disclosure to see exactly which fees your lender folded into the APR you were quoted, and enter that same total in the fees field above for an apples-to-apples check.

When should I compare loans by APR instead of rate?

Whenever fees differ meaningfully between the loans you're comparing. Two loans with the same stated rate but different fees will carry different APRs and different real costs; APR exists specifically as a standardized number for this kind of apples-to-apples comparison across lenders and loan structures.

Does a lower rate always mean a better deal?

Not necessarily. A lender can advertise a lower stated rate while charging more in points and fees, producing a higher true APR than a competitor's higher-rate, lower-fee loan. This matters most if you don't plan to keep the loan for its full term, since large upfront fees get spread over fewer actual months of ownership than the APR's full-term calculation assumes — meaning your realized cost from an early payoff or refinance can be worse than the APR implies.

Worked example: a $300,000 loan at a stated 6.5% over 30 years has a monthly payment of about $1,896.20. With $6,000 in fees, that same $1,896.20 payment on the net $294,000 actually borrowed corresponds to a true APR of about 6.695% — roughly 0.195 percentage points higher than the stated rate. On a loan with lower fees, that gap would shrink; with higher fees, it would widen further.