APR Calculator

What is APR?

APR (Annual Percentage Rate) is the annualized cost of credit expressed as a percentage. For loans, APR includes the interest rate plus certain fees. For savings and investments, APR is the simple annual rate without accounting for compounding. Use this APR calculator to convert between rates and understand the true cost of borrowing or return on savings.

APR vs APY: Key Differences

• APR: Simple annual rate that doesn't account for compounding within the year
• APY: Effective annual rate that includes the effect of intra-year compounding
• APY is always ≥ APR: More frequent compounding makes APY higher than APR
• Formula: APY = (1 + APR/n)ⁿ - 1, where n is compounding frequency
• Banks advertise APY for savings: Shows higher number due to compounding benefit
• Credit cards quote APR: But compound daily, making the effective rate (APY) higher

How Compounding Frequency Affects Returns

The more frequently interest compounds, the more you earn (or pay). This APR calculator shows the impact:

• Daily (365): Interest calculated every day - highest APY for savers
• Monthly (12): Interest calculated monthly - common for credit cards and loans
• Quarterly (4): Interest calculated every 3 months - some CDs and bonds
• Semi-Annually (2): Interest calculated twice per year - traditional bonds
• Annually (1): Interest calculated once per year - APR equals APY

True APR on Loans: Why Fees Matter

When you borrow money, the stated interest rate doesn't tell the whole story. Upfront fees like origination fees, points, and closing costs reduce the amount you actually receive, but you still pay interest on the full loan amount. This APR calculator computes the true APR (sometimes called "effective APR") that reflects all costs. The Truth in Lending Act requires lenders to disclose APR, but you can verify it with this calculator.

Credit Card APR and Daily Compounding

Credit cards typically quote an APR, but they compound interest daily. This means your effective rate (APY) is higher than the stated APR. For example, an 18% APR compounded daily equals 19.72% APY. Use this APR calculator to see how much you're really paying in interest if you carry a balance. The best strategy: pay your balance in full every month to avoid interest entirely.

How to Use This APR Calculator

• APR to APY Mode: Enter your APR and compounding frequency to find the effective annual yield (APY)
• APY to APR Mode: Enter your APY to find the required APR for different compounding frequencies
• True Loan APR Mode: Enter loan details including fees to calculate your true borrowing cost
• Compare Compounding: See how daily vs monthly vs annual compounding affects your returns
• Calculate Interest: Enter a principal amount to see actual dollar amounts earned or paid over time

When to Use Each Rate

• Use APY for savings: Shows true earning potential with compounding
• Use APR for loans: Federal law requires APR disclosure for borrowing
• Compare APY to APY: When shopping for savings accounts or CDs
• Compare APR to APR: When shopping for mortgages, auto loans, or personal loans
• Calculate true APR: When evaluating loans with significant upfront fees