APR Loan Cost Calculator: Understand True Borrowing Cost
Our APR Loan Cost Calculator reveals the real cost of a loan — including fees, points, and PMI. Compare true APR vs stated rate.
What is APR?
Annual Percentage Rate = interest + fees, annualized. Shows effective cost of borrowing.
APR vs Interest Rate
| Factor | Interest Rate | APR |
|---|---|---|
| Includes | Interest only | Interest + fees |
| Used for | Payment calc | Cost comparison |
| Truth in Lending | Not required | Required by law |
Fees Included in APR
- Origination fees
- Points (prepaid interest)
- Closing costs
- PMI (if applicable)
- Application, appraisal
Example: $25K Loan, 7.5%, 5 Years, $500 Fees
- Monthly: $503.29
- Interest Rate: 7.5%
- APR: 8.12%
- Total Cost: $5,697 (interest + fees)
How APR is Calculated
Solve for rate where PV of all payments + fees = loan amount.
Uses iterative method (Newton-Raphson).
Why APR Matters
- Compare lenders fairly
- Low rate + high fees = high APR
- Required on mortgage ads
- Helps avoid hidden costs
Pro Tips
- Always ask for APR
- Negotiate fees
- Pay points only if staying long
- Use with Loan Comparison
Limitations
- Assumes you keep loan full term
- Doesn’t include late fees
- PMI drops off after 78% LTV
Conclusion
Don’t be fooled by low rates. Use our APR Loan Cost Calculator to see the full picture. Explore more in Finance Calculators.