APR calculator.

Why effective APR matters

The federal Truth in Lending Act requires U.S. lenders to disclose APR, not just the stated note rate, so that consumers can compare offers apples-to-apples. The APR includes interest plus most mandatory fees, most importantly the origination fee, which can add several percentage points to the headline number.

Example: A $10,000 loan at 12% over 36 months with a 5% origination fee. The borrower receives $9,500 in cash but repays $10,000 at the 12% rate. The effective APR works out to about 15.4%, meaningfully higher than the headline 12%. A lender quoting 13% with no fee may actually be the cheaper loan.