Enter the loan amount, stated interest rate, term, and total fees to find the true Annual Percentage Rate — the number that lets you compare loans on equal footing.
A $300,000 loan at a stated 6.5% over 30 years pays $1,896.20 a month. With $6,000 in fees folded in, that same payment on the $294,000 actually received works out to a true APR of about 6.695% — a 0.195 percentage-point spread between the number advertised and the number that reflects the fees.
The 6.695% APR assumes the loan runs its full 30-year term, spreading the $6,000 fee over 360 payments. Refinance or sell after just 5 years instead — 60 payments, with $280,832.93 still owed at that point — and the identical $6,000 fee is now spread over a much shorter stretch: solving the same break-even math for only those 5 years gives a realized cost of about 6.989%, noticeably higher than even the quoted APR. The fee itself never changed; only how many months it got to amortize across did.
APR standardizes fees into a comparable rate, but it cannot compare loan types that differ in more than rate and fees — an adjustable-rate loan's APR reflects only its initial fixed period, not what happens after the rate can reset, and a fixed 30-year loan compares awkwardly against a 15-year loan on rate alone, since the shorter term changes total interest independent of any fee. Compare full amortization schedules side by side on the Loan Calculator or Mortgage Calculator, and if refinancing out of an existing loan is the actual decision on the table, the Refinance Calculator models the break-even point on that switch directly.
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.
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.
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.
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.
Comparing a standard installment loan? Try the Loan Calculator. Looking at a mortgage specifically? See the Mortgage Calculator for the full payment breakdown.