Why the Advertised Rate Isn't the Whole Story
Lenders typically advertise the base interest rate of a loan, but many also charge origination fees — sometimes called processing fees or arrangement fees — that add significantly to the total borrowing cost. A 12% loan with a 2% origination fee on a 12-month term actually costs around 15–16% in effective annual terms. This calculator makes that cost transparent by computing the true APR that includes all upfront charges.
When comparing loan products, use true APR rather than the stated rate. A loan with a 10% rate and 3% fee may cost more than one with a 13% rate and no fee, depending on the term. This tool lets you run the comparison in seconds. Always verify the origination fee amount in the loan disclosure document before signing.
Frequently Asked Questions
An origination fee is a one-time upfront charge by the lender for processing and administering your loan. It is often expressed as a percentage of the loan amount and deducted at disbursement or added to the total repayment balance.
The longer the loan term, the less impact a flat origination fee has on APR, since it is spread over more payments. A 2% fee on a 6-month loan has a much larger APR impact than the same fee on a 36-month loan.