The Annual Percentage Rate (APR) is a broader measure of the cost of borrowing money. It includes not just the simple interest rate but also certain fees and charges associated with the loan. This calculator focuses on the interest component of APR over the life of a loan, assuming a fixed interest rate and a standard amortization schedule.
How the Calculation Works
This calculator determines the total interest paid on a loan by first calculating the monthly payment using the standard loan amortization formula, and then subtracting the principal loan amount from the total amount repaid over the loan term.
1. Monthly Interest Rate
The annual interest rate is converted into a monthly rate:
Monthly Rate = Annual Interest Rate / 12
2. Monthly Payment Calculation
The monthly payment (M) is calculated using the following formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = Principal loan amount
i = Monthly interest rate (annual rate / 12)
n = Total number of payments (loan term in months)
3. Total Repayment
The total amount repaid is the monthly payment multiplied by the total number of payments:
Total Repaid = Monthly Payment * Loan Term (Months)
4. Total Interest Paid
The total interest paid is the difference between the total amount repaid and the original principal loan amount:
Total Interest Paid = Total Repaid - Loan Amount
Use Cases for APR Interest Calculation
Loan Comparison: Helps in comparing different loan offers by understanding the total interest cost.
Budgeting: Assists individuals in budgeting for loan repayments.
Financial Planning: Aids in long-term financial planning and debt management.
Understanding Loan Costs: Provides clarity on the true cost of borrowing beyond just the stated interest rate.
Disclaimer: This calculator provides an estimate for informational purposes only. It assumes a fixed interest rate and does not account for potential fees, late payment penalties, or changes in interest rates that may affect the actual cost of the loan.
function calculateAprInterest() {
var loanAmountInput = document.getElementById("loanAmount");
var annualInterestRateInput = document.getElementById("annualInterestRate");
var loanTermMonthsInput = document.getElementById("loanTermMonths");
var resultSpan = document.querySelector("#result .amount");
var principal = parseFloat(loanAmountInput.value);
var annualRate = parseFloat(annualInterestRateInput.value);
var termMonths = parseInt(loanTermMonthsInput.value);
// Clear previous results and error messages
resultSpan.textContent = "$0.00";
// Input validation
if (isNaN(principal) || principal <= 0) {
alert("Please enter a valid loan amount greater than zero.");
return;
}
if (isNaN(annualRate) || annualRate < 0) {
alert("Please enter a valid annual interest rate (0 or greater).");
return;
}
if (isNaN(termMonths) || termMonths <= 0) {
alert("Please enter a valid loan term in months greater than zero.");
return;
}
var monthlyRate = annualRate / 100 / 12;
var monthlyPayment;
var totalInterest;
if (monthlyRate === 0) {
// Handle 0% interest rate scenario
monthlyPayment = principal / termMonths;
totalInterest = 0;
} else {
// Standard amortization formula
monthlyPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, termMonths)) / (Math.pow(1 + monthlyRate, termMonths) – 1);
var totalRepayment = monthlyPayment * termMonths;
totalInterest = totalRepayment – principal;
}
// Format and display the result
resultSpan.textContent = "$" + totalInterest.toFixed(2);
}