What is the difference between the nominal interest rate and the APR?

The nominal rate determines your monthly payment, while the APR reflects the true annual cost of borrowing by factoring in upfront fees.

How do upfront fees affect the APR?

Upfront fees reduce the net cash you receive, which increases the effective interest rate (APR) you pay on the actual money borrowed.

What does it mean to finance a fee?

Financing a fee means adding the fee amount to the total loan balance, which increases your monthly payment and changes the APR calculation.

How does the calculator solve for the APR?

It uses Newton's method, an iterative numerical technique, to solve the annuity present-value equation for the interest rate.

What is the APR premium?

The APR premium is the difference between the calculated APR and the nominal interest rate, representing the extra cost added by fees.

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APR Calculator

Calculate the true Annual Percentage Rate (APR) of a loan when upfront fees are involved. The nominal interest rate sets the monthly payment, but fees reduce the net cash received, raising the effective APR. Uses Newton's method to solve the annuity present-value equation. Shows APR, nominal rate, monthly payment, and the APR premium.

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$20,000 at 6.5% nominal, 60 months, $500 upfront fees (not financed)

Monthly payment based on $20,000 at 6.5% over 60 months ≈ $391. Net loan = $20,000 - $500 = $19,500. Solving for APR: the true annual rate is higher than 6.5% because the borrower receives less cash but pays the same monthly amount.

<div>APR Calculator</div>

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6 options

SettingsAdjust formats, ranges, numbers, and modes.5

Loan AmountnumberRequiredNominal Interest Rate (%)numberRequiredLoan Term (Months)numberRequiredUpfront FeesnumberOptionalDecimal PlacesnumberOptional

TogglesEnable or disable optional behavior.1

Fee Financed (included in loan)checkboxOptionalEnabled when checked

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APR Calculator

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Use cases

Examples

1. Evaluating a Personal Loan with Upfront Fees

2. Financing Loan Fees into an Auto Loan

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