Enter loan amount, nominal rate, and compounding frequency to calculate APR.
Frequently Asked Questions
What is APR?
APR (Annual Percentage Rate) reflects the true annualized cost of a loan or investment, including interest and fees. Unlike the nominal rate, APR accounts for compounding effects.
What is the difference between APR and nominal rate?
The nominal rate is the stated annual rate, while APR is the actual annualized cost. For example, 6% nominal with monthly compounding gives an APR of about 6.17%. Fees also increase APR.
How to compare different loans?
Use APR, not the nominal rate, to compare loans. APR is a standardized annualized cost metric that fairly compares loans with different compounding frequencies and fees.
What is the APR formula?
APR = (1 + r/n)^n - 1, where r is the nominal annual rate and n is the number of compounding periods per year. With monthly compounding (n=12), the effective rate is higher.