How APR is calculated
The calculator finds the monthly rate at which your payments exactly repay the money you actually receive, then turns it into an annual rate including the effect of compounding: APR = (1 + monthly rate)^12 − 1. Fees paid upfront reduce the money you receive, so they push the APR up.
The interest rate is what's charged on the balance. The APR also includes compulsory fees and the effect of compounding, so it's the better figure for comparing deals.
Worked example
Borrowing £10,000 and repaying £200 a month for 5 years gives an APR of 7.7%, with £2,000 total cost of credit. If £300 of fees were taken upfront, the same payments would mean an APR of 9.1%.
Using APR to compare
Compare APRs for the same amount and term. A low monthly payment over a longer term can still have a higher total cost, so look at the total repayable too.
Inputs for the APR calculator
Amount borrowed
The amount of the loan.
Upfront fees
Any arrangement or other fees you pay at the start, or that are taken from the loan. Enter 0 if there are none.
Monthly payment
Your regular monthly repayment from the quote or agreement.
Term
How many years the payments last.
CALCULATOR QUESTIONS
APR calculator questions
How do I calculate APR?
Find the monthly rate at which your payments repay the money you receive, then annualise it: (1 + monthly rate)^12 − 1. The calculator does this for you.
What's the difference between APR and the interest rate?
The interest rate is what's charged on the balance. The APR also includes compulsory fees and the effect of compounding, so it's the better figure for comparing deals.
Do fees change the APR?
Yes. Compulsory upfront fees reduce what you receive, which increases the APR.
What's a representative APR?
In the UK, the advertised rate that at least 51% of successful applicants must be offered. Your own rate may differ.