How do I calculate the annual percentage rate?

To calculate the annual percentage rate for a loan, take the sum of the loan’s interest charges and fees, divide that by the loan amount, and then divide the result by the number of days in the loan term. Next, multiply by 365 to get the annual rate, then multiply by 100 to get the rate in the form of a percentage.

Loan APR Calculation Example

Let’s say you have a $10,000 loan with a 10% interest rate, 1% origination fee and 3-year payoff period. The total interest charges would be $10,000 * 0.1 * 3 = $3,000 (if the loan uses simple interest). The origination fee would be $10,000 * 0.01 = $100.

The total of the interest charges and fees is $3,100. Divide that by the $10,000 loan amount and you get 0.31.

Divide 0.31 by the number of days in the entire loan term (1,095), and you get about 0.00028.

Multiply 0.00028 by 365 and you get the annual rate of 0.103.

Finally, multiply 0.103 by 100 to get an APR of 10.3%.

It’s worth noting that in some cases, a loan’s origination fee will be built into the loan amount. For example, a $10,000 loan with a 1% fee would provide the borrower with $9,900 at the start, and interest would accrue on that amount.

Calculating APR on a Credit Card

For credit cards, you can find your APR by looking at your monthly statement or your online account, where it will always be listed. Credit card APRs work a little differently from loan APRs because fees are not part of the APR (though they are added to your balance and accrue interest) and interest is assessed on a daily basis.

You can learn more about how credit card interest is calculated on WalletHub, as well as use our credit card calculator to estimate how much interest you will actually pay.

Fortunately, you never have to calculate an annual percentage rate yourself. Your credit card or loan issuer will provide this information to you. However, if you want to calculate the actual amount of interest you’ll pay, you’ll need to know the APR.

How to Calculate Interest Charges From an Annual Percentage Rate

1. Open a credit card calculator or loan calculator.
2. Enter in the relevant information, like the card/loan balance, interest rate and fees.
3. Fill in your ideal payoff timeline or monthly payment for credit cards, or the payoff period for the loan.
4. Click the “Calculate” button.
5. Look at the results to see how much interest you’ll end up paying, as well as other details like when you’ll be fully paid off.

You can learn more about annual percentage rates on WalletHub.