True APR Calculator
Processing fees, insurance and charges deducted at disbursal all raise what you actually pay. This restates the headline rate as the rate you are really being charged.
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How it works
Lenders quote a nominal interest rate, but the fees taken at the start mean you receive less than you borrowed while repaying the full amount. The APR is the single rate that describes that whole arrangement — the number regulators require precisely because the nominal rate flatters the deal.
The calculation works from net cash in hand. Fees deducted up front are subtracted from the amount you receive; the instalment is unchanged. Solving for the rate that reconciles the smaller amount received with the same repayments gives the true APR.
APR solves: net amount received = Σ instalment ÷ (1 + r)ᵐ
- Net received — the loan amount less any fee deducted at disbursal
- Instalment — the monthly payment, calculated on the full loan at the nominal rate
- r — the monthly rate the calculator solves for; APR is r × 12
Worked example
Borrowing 500,000 at a nominal 11% over 5 years with a 2% processing fee and 6,000 insurance
Inputs
Results
The advertised 11% is really 12.4%. On this loan the fees are worth about 1.4 percentage points.
Frequently asked questions
What is the difference between interest rate and APR?
The interest rate governs how interest accrues on the balance. The APR adds the compulsory costs of taking the loan — fees, insurance, charges — and expresses the whole thing as one annual rate. Only the APR is comparable between lenders.
Which fees should I include?
Anything you must pay to get the loan: processing or origination fees, administration charges, compulsory credit insurance, documentation and stamp charges. Leave out optional extras you could decline.
Why does a fee matter so much on a short loan?
Because it is spread over fewer payments. The same 2% fee costs far more in APR terms on a two-year loan than on a twenty-year one, which is why short-term borrowing looks so different once fees are included.
Is my data sent anywhere?
No. The calculation runs entirely in your browser. Nothing you type is transmitted to us or stored.
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