Enter your principal amount, annual interest rate, and loan term into the calculator to determine your APR.

## APR Calculation Formula

The following formula is used to calculate the Annual Percentage Rate (APR) from your loan details.

APR = ((Total Cost - Principal) / Principal) / Loan Term * 100

Variables:

- APR is the Annual Percentage Rate (%)
- Total Cost is the total amount paid over the life of the loan ($)
- Principal is the original loan amount ($)
- Loan Term is the duration of the loan in years

To calculate the APR, subtract the principal from the total cost, divide by the principal, and then divide by the loan term. Multiply the result by 100 to get the APR percentage.

## What is APR Calculation?

APR calculation refers to the process of determining the annual rate charged for borrowing, expressed as a percentage that represents the yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction. Accurate APR calculation helps borrowers understand the true cost of a loan.

## How to Calculate APR?

The following steps outline how to calculate the APR using the given formula.

- First, determine your principal amount, annual interest rate, and loan term.
- Next, calculate the monthly payment using the principal amount, annual interest rate, and loan term.
- Calculate the total cost by multiplying the monthly payment by the number of payments.
- Use the formula from above: APR = ((Total Cost – Principal) / Principal) / Loan Term * 100.
- Finally, calculate the APR by plugging in the values.
- After inserting the variables and calculating the result, check your answer with the calculator above.

**Example Problem:**

Use the following variables as an example problem to test your knowledge.

Principal Amount = $20,000

Annual Interest Rate = 5%

Loan Term = 5 Years

## FAQ

**1. What is APR?**

APR stands for Annual Percentage Rate, which is the annual rate charged for borrowing, expressed as a percentage that represents the yearly cost of funds over the term of a loan.

**2. How is APR different from the interest rate?**

While the interest rate is the cost you will pay each year to borrow the money, expressed as a percentage rate, APR includes the interest rate plus any fees and other costs associated with the loan.

**3. How often should I use the APR calculator?**

It’s helpful to use the APR calculator whenever you are considering taking out a new loan or if you want to compare different loan offers.

**4. Can this calculator be used for different loan types?**

Yes, you can use this calculator for different types of loans by adjusting the principal amount, annual interest rate, and loan term accordingly.

**5. Is the calculator accurate?**

The calculator provides an estimate of your APR based on the inputs provided. For exact figures, it’s best to consult with your lender or financial advisor.