A loan’s stated interest rate and its APR are often different numbers, and the gap between them is exactly the fees folded into borrowing that the rate alone doesn’t show.
How it works
The monthly payment is set by the stated rate on the full amount borrowed. But upfront fees mean less money actually reaches the borrower than the loan amount on paper — so the true cost of borrowing, expressed as a rate, is higher than the stated one. This calculator finds that rate by searching numerically for the discount rate at which the payments actually made equal what was actually received, the same kind of root-search this site’s IRR calculator uses.
Why APR is the number to compare loans on
Two loans with an identical stated rate can cost different amounts if one carries larger fees — comparing rates alone would miss that entirely. APR folds the fees in, which is exactly why lenders are required to disclose it.
How to use this calculator
- Enter the loan amount and its stated interest rate.
- Enter any upfront fees and the loan term.
Frequently asked questions
Why is APR always higher than the stated rate when there are fees?
Because the same payments are now being measured against a smaller amount actually received — the same dollars represent a higher effective cost against less money.
Does APR include every possible loan cost?
Not always — some fees, like certain third-party charges, may be excluded depending on the loan type and disclosure rules. It’s a standard measure, not a perfectly exhaustive one.
Why does this calculator use a numerical search instead of a formula?
Because there’s no algebraic way to isolate the rate directly once fees are involved — the same reason this site’s IRR calculator searches for its answer rather than computing it in one step.
