APR Calculator - Annual Percentage Rate
True APR Calculator
Calculate the real cost of borrowing by accounting for compounding interest and upfront fees.
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Understanding APR
APR stands for Annual Percentage Rate. It is a broader measure of the cost to you of borrowing money than the interest rate.
Interest Rate vs. APR
The interest rate is the percentage of the principal you pay to the lender per year. The APR includes the interest rate plus other costs such as broker fees, discount points, and some closing costs.
Logic & Formulas
Calculating APR is complex because it involves finding the internal rate of return (IRR). We solve for the rate (r) where the present value of all future payments equals the net amount received:
Loan Amount - Fees = Σ [ Payment / (1 + r)^n ]
The calculator uses the Newton-Raphson numerical method to find this value precisely through iteration.