APR Calculator: Uncovering the True Cost of Borrowing

When you apply for a loan, you are often presented with two different interest rates: the interest rate and the APR (Annual Percentage Rate). While the interest rate is the cost you pay for the principal, the APR is the "All-In" number that includes fees, points, and other mandatory costs. This APR Calculator helps you pull back the curtain and see exactly what you are paying.

1. Why APR Matters for Comparison

If you are comparing two loans, you cannot rely on the interest rate alone.

• Loan A: 6% interest rate + $5,000 in fees.
• Loan B: 6.25% interest rate + $0 in fees.

On paper, Loan A looks cheaper. However, the APR of Loan A might actually be higher than Loan B. APR is the industry standard for comparison because it levels the playing field.

2. Using APR in Your Financial Planning

Before committing to a Mortgage or a significant Loan, always ask for the APR. It is especially critical when using our Refinance Calculator, as refinance fees are often wrapped into the new loan balance. You can see how this APR affects your long-term wealth by viewing your Amortization Schedule.

3. FAQ

Q: Is APR the same as APY? A: No. APR is for borrowing (cost), while APY (Annual Percentage Yield) is for saving (earnings). APY accounts for compounding within the year.

Q: Do credit cards have APR? A: Yes. Credit card APR usually represents the annual cost of carrying a balance, though it is usually charged daily.

Conclusion

The lowest interest rate isn't always the best deal. Use APR to make sure you are choosing the most affordable borrowing option. Enter your loan details above to find your true cost.