Why APR and interest rate differ
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.
Worked example
A £10,000 loan repaid at £198.01 a month for 5 years has an APR of 7.2% with no fees. Add a £250 arrangement fee and the APR rises to 8.4%, though the payment stays the same.
Comparing loans
Two loans with the same interest rate can have different APRs because of fees. Compare APRs and total amounts repayable.
Inputs for the loan 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
Loan APR calculator questions
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.
How much does a fee add to the APR?
It depends on the size of the fee and the term. In the example, a £250 fee adds about 1.1 percentage points.
Why do short loans show a big APR jump from fees?
A fee spread over fewer months has a bigger effect on the annual rate.
Is a lower APR always better?
For the same amount and term, yes. Also compare total cost.