How To Calculate APR For Loan?

APR Calculation is Important and this is How You Should Do It

APR is Annual Percentage Rate. While most borrowers are aware of interest rate, many do not realize the importance of APR. 

It is the percentage rate that you will have to pay to the lender along with the interest. As APR is an expense, it is as important as the interest on the loan and that is why you should always calculate the APR before taking a loan.

What does APR include?

APR consists of different charges and fees associated with the loan. Some of the most common charges are closing costs and processing fee. 

As every lender has different charges/fees included in the APR, you should check with your lender and confirm what all is included in it.

Calculate APR manually:

It is a bit complex so you will need a calculator for it.
•    Add the origination fee (loan processing cost charged by the lender) and interest
•    Divide the sum with the loan amount
•    Divide the result with the number of days of the loan (1 year = 365 days)
•    Now, multiply it by 365 days
•    Again, multiply it by 100
The result will be the APR for the loan.

Online APR calculator:

In case, you find the above-mentioned method of calculation too complex, you could go for the web APR calculator. There is a host of such calculators available. However, you should verify that it would calculate it as per the formula used in the AU. 

The calculator will ask for details like loan amount, term of the payday loan, per year interest rate, and additional fees. Remember, it is important that you enter all the details. Otherwise, the calculator will not work.

It is every lender’s duty to let you know the APR:

Legally, every lender has to reveal the APR to the borrower while explaining the details of the loan. Hence, you should not hesitate to ask. If you are borrowing loan online then you will find the APR mentioned on the lender’s website.
Location: Australia

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