This Page's Content Was Last Updated: May 29, 2023

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Inputs

Loan Amount

$

Nominal Rate of Interest

%

Loan Term

Loan Fees

$

Payment Frequency

Compounding Frequency

Fee is

Results

Your APR:

5.82%

Loan Summary

Effective Annual Rate: | 5.12% |

Monthly Payment: | $192.49 |

Total Payment: | $11,549.19 |

Interest Cost: | $1,349.19 |

This APR calculator is designed to help you calculate the Annual Percentage Rate (APR) for a variety of amortizing loans, including personal loans, secured loans, car loans, and home mortgages. This calculator assumes that fees associated with the loan are paid upfront. If the fees are added to the loan principal APR would become higher as the interest you will pay on these fees is another cost associated with the loan. The calculator will also help you understand the cost of your loan by providing you with the monthly payment amount, total interest that you will pay, and the total payments to fully pay off the loan.

APR is the annual cost of the loan as a percentage of the remaining principal. Thus APR includes not just the annual interest rate but also other loan costs you would have to pay. These costs might be upfront loan fees or service charges. APR gives you the true picture of the cost of borrowing, which is why knowing your loan's APR is important.

To use this APR calculator, enter your loan amount, interest rate, loan term length, any additional fees you have to pay for your loan, your payment period and interest compounding frequency. Note that this calculator assumes that fees are paid out of pocket. If the fees are added to the loan, APR would be higher as the interest on those fees is another cost associated with the loan. These additional fees are what makes your APR different from your loan's interest rate. If you did not have to pay any additional loan fees, then your APR would be the same as your loan's interest rate.

The formula for calculating APR involves adding the loan fees with the total interest paid on the loan, compared to the original loan principal amount and the loan term length. To calculate APR, one has to consider how the loan is paid back. The simplest case is when you pay interest periodically but will pay the principal in a lump sum payment at the end of the term. For this case, the APR formula is:

APR=X 365 X 100

Loan Fees + Total Interest PaidLoan Amount

Number of Days in Loan TermAPR =

in Loan Term X 365 X 100

Loan Fees +

Total Interest PaidLoan Amount

Number of DaysTotal Interest PaidLoan Amount

in Loan Term

Where the following is used in the APR formula:

- Loan Fees: Costs associated with the loan, such as legal fees, origination fees, and appraisal fees.
- Total Interest Paid: This is the total interest paid over the life of the loan.
- Loan Amount: The original amount borrowed.
- Number of Days in Loan Term: Your loan term length, in days.

It is more common for loans to be amortized over their term. In other words, loans are more common to entail periodic payments, including interest and principal. The calculation of APR in such cases is more complicated. So we explain it through an example below.

Let’s say that you took out a $10,000 personal loan with an interest rate of 5% for a term of 5 years. The bank charged you a $500 origination fee. What would the loan’s APR be?

First off, you would need to know your monthly payment amount. You’ll be told this amount, but you can also calculate it yourself. To calculate your loan’s monthly payment:

Installment

Payment=

Payment=

(Loan Amount) (r) (1 + r)^{n}(1 + r)^{n} - 1

Where:

r = Periodic Interest Rate

n = Number of Payments

Since you’re looking for the monthly loan payment, the periodic interest rate would be monthly. You can find that by dividing your annual interest rate (5%) by the number of months in a year (12). This gives you a periodic interest rate of 5%/12 = 0.4167%.

The number of payments is 12 payments in a year, for five years. That gives you a total of 12 x 5 = 60 payments.

Plugging those numbers into the loan payment formula:

Loan

Payment=

Payment=

( $10,000 ) ( 0.4167% )

( 1 + 0.4167% )^{60}( 1 + 0.4167% )^{60} - 1

( 1 + 0.4167% )

Loan Payment = $188.71

Now that you know your monthly loan payment amount, you can calculate the total interest paid. To do so, find out the total amount paid, which is the monthly loan payment multiplied by the total number of monthly payments made. That would be:

$188.71 x 60 payments = $11,322.60 total paid

Next, the total interest paid would be the total amount paid minus the original loan amount of $10,000. This means the total interest paid would be $11,322.60 - $10,000 = $1,322.60.

We need to find a rate of interest which give rise to the same interest cost as the total loan cost. To do this, we add non-interest and interest expenses related to this loan, $1,322.60+$500 = $1,822.60. The total repayment amount for this loan is $1,822.60+$10,000 = $11,822.60, which accounts for principal, interest and fees.

Thus your installment would be $11,822.60/60 = $197.04 if the loan fees were spread over all installments. APR is the interest rate which translates into an installment of $197.04. To find this rate, we need to solve,

By substituting the values of principal and number of payments we get

This equation cannot be solved analytically, a numeric solution would give APR = 6.79%.

Did you know that Canadian lenders are required by law to tell you the APR of your loan in your loan agreement? This helps to protect borrowers by ensuring that they are aware of the cost of borrowing.

When you are considering taking out a loan, make sure you ask the lender for the loan’s APR so that you can compare different offers. Remember, the lower the APR, the less you will pay in interest and fees over the life of the loan.

Some costs and fees are included in the APR calculation, while others aren’t. This section will take a look at what is and what isn’t included in the APR.

Some lenders might charge an origination fee for personal loans, lines of credit, and car loans. For example, Symple is an online personal loan lender that charges an origination fee of up to 5%. That can significantly increase the cost of the loan, and so you’ll want to consider this when comparing loan offers. Non-government student loans, such as those by a bank or credit union, may also have additional fees.

Other things to include in your APR calculation include legal fees, mortgage broker fees, home appraisal fees, and home inspection fees. These fees are more common for those applying for a mortgage.

Not all costs would be included in the APR. For example, mortgage default insurance premiums for insured mortgages, which are required for high-ratio mortgages, would not be considered a loan fee. Title insurance, mortgage prepayment penalties, and other optional charges that are not required would also not be included in the APR. Costs not related to the loan itself, such as property taxes for a home, would not be included in a mortgage’s APR. A loan's APR only includes mandatory fees and charges that are required to take out the loan.

The calculators and content on this page are provided for general information purposes only. WOWA does not guarantee the accuracy of information shown and is not responsible for any consequences of the use of the calculator.