APR Calculator
Calculate the Annual Percentage Rate on deposits and loans, and convert between nominal and effective rates.
Results
The APR Calculator converts between the Annual Percentage Rate (APR) and the effective annual rate based on the compounding frequency. The output shows both the nominal and effective rates side by side.
Annual Percentage Rate Explained
The Annual Percentage Rate (APR) is the nominal interest rate that does not account for intra-year compounding. Banks use APR on CDs and loans to express the base rate before the compounding schedule is applied.
APR for Deposits vs. Loans
APR serves different purposes for deposits and loans. For deposits (CDs, savings accounts), APR is the base rate before compounding — the effective yield (APY) is higher. For loans (mortgages, credit cards), APR includes the interest rate plus mandatory fees (origination fees, points, closing costs) expressed as an annual rate. The Truth in Lending Act (TILA) requires lenders to disclose APR so borrowers can compare the total cost of credit across different loan products.
APR to APY Conversion
Convert APR to APY using the formula: APY = (1 + APR/n)n − 1, where n is the number of compounding periods per year. A 5.00% APR compounded daily (n=365) yields an APY of 5.1267%. A 5.00% APR compounded monthly (n=12) yields an APY of 5.1162%. The difference between APR and APY increases with compounding frequency.
Periodic Rate Conversion
The periodic rate is the APR divided by the number of periods per year. A 6.00% APR has a monthly periodic rate of 0.50% (6.00% ÷ 12), a daily periodic rate of 0.01644% (6.00% ÷ 365), and a quarterly periodic rate of 1.50% (6.00% ÷ 4). The periodic rate determines the interest charged or credited in each compounding period.
APR ↔ APY Converter
Enter an APR and select a compounding frequency to see the equivalent APY. Reverse the conversion to find the APR that produces a specific APY.
Rate Converter
Truth in Lending Act (TILA)
The Truth in Lending Act (TILA) requires all creditors to disclose the APR on consumer credit products. Implemented by Regulation Z, TILA standardizes how lenders calculate and present the cost of borrowing. Before TILA, lenders could advertise attractive base rates while hiding fees in the fine print. TILA's APR disclosure enables direct comparison across lenders, credit cards, auto loans, and mortgage products.
Fixed vs. Variable APR
Fixed APR remains constant for the entire loan or deposit term. Variable APR adjusts periodically based on a benchmark index. Variable APR is calculated as the benchmark rate (such as the Prime Rate) plus a margin. A credit card with a margin of 13% above a Prime Rate of 8.50% carries a variable APR of 21.50%. When the Prime Rate changes, the variable APR adjusts.
Calculate APR
Enter your rate and compounding frequency above to convert between APR and APY.
Calculate APRFAQs
What is APR?
APR stands for Annual Percentage Rate, the nominal interest rate before accounting for compounding. For loans, APR includes interest plus mandatory fees expressed as an annual rate.
How is APR different from APY?
APR is the nominal rate before compounding, while APY includes the effect of compounding. APY is always equal to or greater than APR when compounding occurs more than once per year.
Why does APR include fees?
APR includes fees because the Truth in Lending Act requires lenders to disclose the total cost of credit as a single annual rate, including origination fees and closing costs.
How do I convert APR to a monthly rate?
Convert APR to a monthly rate by dividing by 12. A 6.00% APR equals a monthly rate of 0.50%.
Is a lower APR always better for borrowers?
Yes, a lower APR is better for borrowers because it represents a lower total cost of credit. Borrowers should also compare loan terms and prepayment penalties.