APR Calculator
Calculate the true APR (Annual Percentage Rate) of a loan by entering the loan amount, upfront fees (such as origination fees and discount points), the monthly payment amount quoted by your lender, and the total number of monthly payments. Under Regulation Z (Truth in Lending Act), APR reflects the actual yearly cost of credit including both interest and certain fees. When lenders quote you a stated interest rate, fees are often separate, but the true APR combines both to give you the complete picture. A loan with a low interest rate but high fees may have a higher APR than a competing loan with a slightly higher rate and lower fees. Comparing APRs across lenders lets you make an accurate, like-for-like cost comparison. This calculator uses the present-value equation required by Regulation Z, solving for the monthly rate that makes the amount you actually receive (after fees are deducted) equal to the discounted value of your future payments. The result shows both the true APR and the fee impact (the percentage-point increase from stated rate to true APR).
A $20,000 loan with $400 in fees, 60 monthly payments of $390: true APR is -- (vs. -- stated rate without fees).
How the true APR is calculated
Under Regulation Z (12 CFR 1026), APR is found by solving for the periodic rate r that makes the present value of all scheduled payments equal to the amount actually received by the borrower (the loan amount minus upfront fees). This calculator uses bisection over 50 iterations to find that rate, then multiplies by 12 to annualise.
Amount financed = loan amount - fees
Solve for r such that:
amount financed = payment x (1 - (1 + r)^(-n)) / r
True APR = r x 12 x 100
Worked example
$20,000 loan, $400 fees, 60 monthly payments of $390:
- Amount financed = $20,000 - $400 = $19,600
- Solve: $19,600 = $390 x (1 - (1 + r)^(-60)) / r
- Bisection gives r approximately 0.007027/month
- True APR = 0.007027 x 12 x 100 = approximately 8.43%
- Stated rate (using $20,000, not $19,600) is lower, approximately 7.49%
The 0.94 percentage-point gap is the fee impact, the extra cost the $400 upfront charge adds expressed as an annualised rate.
Regulation Z and the Truth in Lending Act
The Truth in Lending Act (TILA), implemented by the CFPB's Regulation Z (12 CFR 1026), requires lenders to disclose APR on all consumer credit products. The intent is to give borrowers a single, standardised number that allows like-for-like comparison across lenders, regardless of how each lender structures its fees.
Fees that are included in the Regulation Z APR calculation include origination fees, discount points and certain prepaid finance charges. Fees excluded include appraisal fees, title insurance premiums and government filing fees, because those are not charges for the use of credit.
The CFPB publishes official guidance on which fees count as finance charges at consumerfinance.gov.
When APR equals the stated rate
If a loan carries zero origination fees and no other Regulation Z finance charges, the APR equals the stated (nominal) interest rate. This is why a no-fee mortgage at 7% will show 7.000% APR, while the same loan with $3,000 in points will show a higher APR.
APR calculator: frequently asked questions
What is APR and why does it matter?
APR (Annual Percentage Rate) is the cost of credit expressed as a yearly rate, including interest and certain fees. Lenders must disclose APR under Regulation Z (12 CFR 1026). Higher fees mean a higher APR than the stated interest rate, so comparing APRs across lenders gives a more accurate picture of total borrowing cost than comparing interest rates alone.
What fees are included in APR?
Under Regulation Z, fees that must be included in APR include origination fees, discount points, and certain closing costs. Fees excluded from the APR calculation include appraisal fees, title insurance, and recording fees. For a complete list, see the CFPB guidance at consumerfinance.gov.
Why is a loan's APR higher than its interest rate?
Because APR includes fees in addition to interest. A loan with a 7% interest rate but significant origination fees might have an 8.5% APR. The gap between the stated rate and the APR tells you how much fees add to the true cost of borrowing. When fees are zero, APR equals the stated interest rate.
How do I compare loans using APR?
Comparing APRs across loans with the same term gives a like-for-like cost comparison. For loans of different lengths, compare both APR and total interest paid, because a lower APR on a longer loan can still cost more in total. Source: CFPB, consumerfinance.gov.
Official sources
- CFPB, Regulation Z (Truth in Lending): consumerfinance.gov/rules-policy/regulations/1026/.
- CFPB, APR vs. interest rate: consumerfinance.gov/ask-cfpb/...
Reviewed by the CalculatorHub team, edited by James Graham, 12 June 2026. See our methodology. General information, not financial advice.