David is a Chartered Financial Analyst with over 15 years of experience in consumer credit and financial analysis, specializing in loan structures and interest rate calculations.
This 4-in-1 Loan APR calculator helps you understand the true cost of borrowing. Enter any three values—Loan Amount, Total Interest Paid, Term, or APR—and we will solve for the fourth.
Loan APR Calculator
Loan APR Formula (Simple Interest)
R = ( (I / P) / T ) * 100
Solve for Total Interest (I):
I = P * (R / 100) * T
Solve for Loan Amount (P):
P = I / ( (R / 100) * T )
Solve for Term (T):
T = I / ( P * (R / 100) )
Formula Variables
- (R) APR (%): The Annual Percentage Rate, or the total cost of borrowing expressed as a yearly percentage.
- (I) Total Interest Paid: The total dollar amount of interest paid over the life of the loan.
- (P) Loan Amount: The initial principal amount borrowed.
- (T) Term (Years): The total length of the loan in years.
Related Calculators
- Simple Interest Calculator for Loans
- Personal Loan Payment Calculator
- Car Loan Interest Calculator
- Compound Interest Calculator
What is a Loan APR?
APR, or Annual Percentage Rate, is one of the most important metrics for comparing loans. It represents the *true* annual cost of borrowing money, expressed as a percentage. Unlike a simple interest rate, the APR includes not only the interest but also other mandatory charges and fees associated with the loan, such as origination fees or closing costs. This provides a more complete, “apples-to-apples” comparison of different loan offers.
For example, a loan with a 5% interest rate but high fees could have a higher APR than a loan with a 5.5% interest rate and no fees. The TILA (Truth in Lending Act) requires lenders to disclose the APR so consumers can see the unified cost of credit.
Note: This calculator uses a simple interest formula to estimate APR based on total interest paid. It does not account for monthly compounding or specific fees. For official loan documents, the APR is calculated using a more complex amortization formula.
How to Calculate APR (Example)
-
Identify the Variables
You get a personal loan offer:
• Loan Amount (P): $10,000
• Total Interest Paid (I): $1,500
• Term (T): 3 years
We need to find the APR (R). -
Choose the Correct Formula
To find the APR, we use the simple formula:
R = ( (I / P) / T ) * 100 -
Calculate Total Interest per Dollar
First, find the total interest-to-principal ratio:
I / P = $1,500 / $10,000 = 0.15 -
Annualize the Rate
Divide the total rate by the number of years to get the annual rate (decimal):
0.15 / 3 years = 0.05 -
Convert to Percentage
Multiply by 100 to express the rate as a percentage:
0.05 * 100 = 5%
The estimated APR for this loan is 5%.
Frequently Asked Questions (FAQ)
What’s the difference between APR and Interest Rate?
The Interest Rate is just the base cost of borrowing the money. The APR (Annual Percentage Rate) includes the interest rate *plus* other mandatory charges and fees (like origination fees). APR is always the more accurate measure for comparing the total cost of different loans.
Why is my calculated APR different from the bank’s?
This calculator uses a *simple* interest formula for estimation. Real APRs on official loan documents must account for the compounding of interest (usually monthly) and all specific lender fees. This tool is best for quick estimates, not for legal or financial decisions.
Does this APR calculator work for mortgages?
No. Mortgages and most auto loans use complex amortization schedules with compounding interest. This calculator is only for estimating simple interest loans where interest does not compound.
How can this calculator find my Total Interest?
If you know the Loan Amount (P), the APR (R), and the Term (T), this calculator can work backward to solve for `I` (Total Interest). This shows you the total dollar cost of the loan over its lifetime, which is often more impactful than the rate itself.