Calculate the Annual Percentage Rate including fees to see the true cost of borrowing.
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APR is the single annual rate that makes the present value of all payments equal the net amount you actually receive (loan minus upfront fees). This calculator approximates it from your payment schedule and total fees.
The interest rate is the pure cost of borrowing; APR adds upfront fees (origination, points, doc fees) into one annualized number. APR is higher than or equal to the interest rate whenever fees exist.
Because it makes loans comparable. A 7.0% rate with $2,000 in fees on a $10,000 loan can cost more than a 7.25% rate with no fees — APR shows that directly.