Understanding the Difference

Nominal Interest Rate: This is the stated annual interest rate for the loan. It's the basic cost of borrowing the money, without including any additional fees charged by the lender.

Annual Percentage Rate (APR): The APR is a broader measure of the cost of your loan. It includes the nominal interest rate PLUS certain fees associated with the loan, such as origination fees or other upfront charges. The APR is designed to give you a more complete picture of the total cost of borrowing.

• If a loan has no fees, its APR will be the same as its nominal interest rate.
• If a loan has fees, its APR will be higher than its nominal interest rate.
• The APR is a useful tool for comparing different loan offers, as it standardizes the cost presentation. A loan with a lower nominal interest rate but high fees might actually have a higher APR (and thus be more expensive) than a loan with a slightly higher nominal rate but no fees.

Note: This calculator estimates APR based on common calculation methods for loans with upfront fees. Always refer to the official Loan Estimate or Truth in Lending disclosure from your lender for the precise APR and terms.