Mortgage APR (3-8%)
Includes points, mortgage insurance, and closing costs. A 6.5% rate often becomes 6.8-7.2% APR after fees.
Calculate the Annual Percentage Rate — the true yearly cost of borrowing including interest and fees. Compare mortgages, auto loans, credit cards, and personal loans on equal footing.
APR (Annual Percentage Rate) is the total yearly cost of borrowing money, expressed as a percentage. Unlike a simple interest rate, APR includes origination fees, closing costs, and other charges.
Two loans with the same interest rate can have very different APRs if one has higher fees. A 6% interest rate with $2,000 in fees costs more than a 6.25% rate with no fees — APR reveals this truth.
Federal law (Truth in Lending Act) requires lenders to disclose APR so borrowers can make fair comparisons. Always compare APR, not just the advertised interest rate.
Includes points, mortgage insurance, and closing costs. A 6.5% rate often becomes 6.8-7.2% APR after fees.
Variable rate tied to prime rate. Only applies to balances carried month-to-month. Pay in full = 0% cost.
Depends heavily on credit score. Excellent credit: 4-6%. Average credit: 8-12%. Subprime: 15-25%.
30-year fixed rates. Fees include origination (0.5-1%), appraisal ($300-500), title insurance, and PMI if <20% down.
36-72 month terms. New cars get better rates than used. Dealer financing often has hidden markups vs direct lenders.
Unsecured loans with wider APR range. Origination fees of 1-8% significantly impact the effective APR.
Federal loans: 5-8% fixed. Private loans: 4-14% variable. Federal loans offer income-driven repayment options.
Highest APR of common debt. 20%+ is standard. Balance transfers at 0% for 12-21 months can save thousands.
Extremely predatory. A $15 fee per $100 for 2 weeks = 391% APR. Avoid at all costs — use alternatives.
Interest rate is the cost of borrowing the principal. APR includes the interest rate PLUS fees and other charges, giving you the total annual cost. APR is always ≥ the interest rate.
APR doesn't account for compounding — it's a simple annual rate. APY includes compounding. For deposits, APY > APR (you earn more). For loans, the effective cost with compounding is higher than APR suggests.
The average credit card APR is about 20-22%. Below 15% is considered good. If you pay the full balance each month, APR is irrelevant — you pay zero interest regardless of the rate.
APR includes most mandatory fees (origination, points, mortgage insurance) but may exclude optional costs like title insurance, appraisal fees, or late payment charges.
Fixed APR stays constant throughout the loan. Variable APR changes with market rates (usually prime rate). Variable is often lower initially but can increase significantly over time.
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