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APR Calculator

Calculate the Annual Percentage Rate (APR) of a loan including fees. Understand the true cost of borrowing.

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Comparing loan offers from different lenders, especially when upfront fees vary. A 0% APR car loan still costs money in dealer markup. Understanding whether paying points to lower your rate makes financial sense over the loan term.

Iterative APR Calculation

The APR is found by solving for the rate r where: Net Loan Amount = Monthly Payment * (1 - (1+r)^-n) / r, using a binary search between 0% and 100%. This accounts for upfront fees that reduce the amount you receive but are included in your monthly payment calculation. The nominal interest rate alone would understate the true cost of borrowing.

Fun Fact: The Equal Credit Opportunity Act of 1974 required lenders to disclose APR to prevent predatory lending practices. Before this, lenders could advertise low monthly payments while hiding the true annual cost of credit.

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