APR Calculator

What APR includes that the interest rate does not

The annual percentage rate folds compulsory costs into a single comparable figure: arrangement and origination fees, broker fees, mandatory insurance and certain administrative charges, alongside the interest itself. Two loans quoting the same interest rate can carry materially different APRs because one charges a large upfront fee. Comparing on the interest rate alone systematically favours whichever lender has moved more of its margin into fees.

Flat rates are the biggest trap

A flat rate charges interest on the original principal for the entire term, ignoring the fact that you repay as you go. Because your average outstanding balance is roughly half the original, a flat rate translates to an APR close to double: 6 percent flat is around 11 to 12 percent APR on a typical term. Flat rates are common in vehicle and consumer finance in several markets precisely because the headline number looks competitive.

Representative APR is not your APR

Advertised rates carry the word representative because the lender only has to offer them to 51 percent of accepted applicants. The remaining 49 percent can be offered materially worse terms after a credit check. An advertised figure is a marketing floor, not a quote.

APR and short-term borrowing

Annualising a two-week loan produces enormous percentages that are technically correct and practically misleading. For very short borrowing, compare the total cost in currency rather than the rate: a fee of 15 on 100 borrowed for a fortnight is a clearer basis for judgement than an APR in the hundreds of percent.

What APR still leaves out

It excludes optional add-ons, late fees, early repayment charges and, on a variable rate, any future movement. A loan with a low APR and a punitive early repayment penalty can be the more expensive choice if you expect to repay ahead of schedule. Read the terms alongside the number.

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