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## What is the meaning of APR?

The term APR is also well – known as the annual percentage rate of charge which can either correspond to nominal APR or the effective APR or as it is popular by another name, EAPR. It generally describes the interest rate every year & not like that of the monthly rate or the fee which is seen to be applicable for the loan or for that matter the mortgage loan or credit card or other similar things. One can state that this turns out to be the finance charge which happens to be expressed in the form of the annual rate.

## Annual Percentage Rate Calculator

In general, the nominal APR is said to be the simple – interest rate & this one is for about a year. While on the other hand, the effective APR or the EAPR is stated to be calculated across a particular year & is said to be the fee along with the compound interest rate. However, in some of the areas, this APR or the annual percentage rate has been defined as the simplified counterpart to effective interest rate which a borrower has to pay on the loan.

In addition to the above stated facts, in a few countries or we can say that in most of the countries as well as jurisdictions, the lenders like that of the banks, have to disclose the cost of borrowing & this is done in some standardized manner in the form of the consumer protection. Therefore, when the talk is about APR or the annual percentage rate, the main part of this is that it will make the things easier when compared to the loan options apart from the lenders.

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## What is the use of an APR calculator?

The APR calculator makes itself to be useful to a great extent, as it is the calculator which finds APR or the effective annual percentage rate for a loan now let that be a car loan or the fixed mortgage or any other kind of loan. Thus, it permits an individual to specify the interest compounding along with the payment frequencies.

### What is the formula to calculate APR?

The formulae used in an APR calculator have been given below –

The 1^{st} formula that is used in the APR calculator is used to calculate the monthly payment with the \(C\, +\, E\) while the interest rate is \(r\, = \, \frac{R}{1200}\)

\(P\, =\,\frac{(\,C\, +\, E\, )\, r\, (\, 1\, +\, r\, )^N}{(\, 1\, +\, r\, )^N\, -\,1}\)

As for the APR, it is calculated in the following manner \(a\,=\, \frac{A}{1200}\) which is then solved with the help of the **Newton – Raphson method –**

\(\frac {a\, ( \,1\, +\, a\, )^N}{(\,1\, + \, a\,)^{N}\,-\, 1}\,-\frac{P}{C}\,=\,0\)

In the above equation, C is the loan amount, while E is the extra cost R is the interest rate N is the number of months.

## How to use an APR calculator?

To make use of an APR calculator, you would be required to enter the values in the fields provided & click on the calculate tab. The values which are required to know the APR are loan amount, extra cost, rate of interest & the number of months.