APR calculator

What is APR?

The Annual Percentage Rate (APR) expresses the total yearly cost of borrowing — including interest and certain fees — as a single percentage, so you can compare loans on a like-for-like basis. This calculator estimates the effective APR from the loan amount and the fixed monthly repayment.

APR is useful because two loans with the same headline interest rate can cost very different amounts once fees and the repayment schedule are taken into account.

Why APR exists

APR converts interest and compulsory charges into one annual figure so that products with different fee structures can be compared. Without it, a low rate with a large arrangement fee looks cheaper than a higher rate with none, when it may not be.

Where it stops being comparable

Advertised APR is representative — the lender only has to offer it to a proportion of successful applicants, so the rate you are given may be higher. It also assumes the agreement runs its full term, which makes it a poor guide if you intend to repay early or to switch. And for business lending it is often not quoted at all, which is where a total-cost comparison over the actual expected term is the only honest one.