Loan Origination Fee & APR Calculator

How the fee-adjusted APR is calculated

An origination fee changes the economics of a loan because the borrower either receives less cash, pays extra cash at closing, or repays a larger financed balance. This calculator first finds the dollar fee, then measures the scheduled payments against the net economic proceeds.

The origination fee is:

origination fee = loan amount * (fee rate / 100)

Total APR fees are the origination fee plus the other lender fees entered. If fees are deducted, the scheduled loan balance is the entered loan amount, cash disbursed is loan amount minus fees, and net economic proceeds are also loan amount minus fees. If fees are paid upfront, cash disbursed is the loan amount, but net economic proceeds are loan amount minus fees because the borrower pays the fees separately. If fees are financed, the scheduled balance is loan amount plus fees, cash disbursed is the loan amount, and net economic proceeds are the loan amount.

The monthly payment uses the fixed-payment amortization formula:

payment = B * i / (1 - (1 + i)^-n)

• B is the scheduled loan balance.
• i is the stated annual rate divided by 100 and then by 12.
• n is the number of monthly payments, or years * 12.

If the stated rate is zero, the payment is simply B / n. The fee-adjusted APR is the annualized monthly discount rate that makes the present value of all scheduled payments equal the net economic proceeds:

N = sum of payment / (1 + j)^k

In that equation, N is net economic proceeds, j is the monthly APR rate being solved, and k runs from 1 through n. The calculator reports 1200 * j as the APR percent.

What moves the result most

The fee-adjusted APR rises when fees are large relative to the cash the borrower actually gets. Shorter terms also make fees matter more because the same upfront cost is spread over fewer payments. Financing fees usually increases the monthly payment because the balance is larger, and it can add interest on the fees themselves.

Fee treatment affects cash flow. Deducted fees reduce the cash received on day one. Upfront fees leave the loan disbursement intact but require separate cash at closing. Financed fees preserve the loan disbursement but increase the balance and total scheduled payments.

What this calculator leaves out

This is a mathematical estimate, not an official Truth in Lending APR disclosure. Actual disclosed APR can differ because lenders use exact payment dates, rounding rules, regulatory fee classifications, odd first payment periods, and other timing details. The calculator assumes a fixed rate, equal monthly payments, no balloon payment, no prepayment, no late fees, and no rate changes. Taxes, insurance, optional products, and third-party charges are excluded unless you enter them as APR fees.

Worked example

Suppose a borrower takes a $25,000 loan at a stated 10% annual rate for five years, with a 5% origination fee deducted from proceeds and no other APR fees. The origination fee is $25,000 * 5%, or $1,250. Cash disbursed and net economic proceeds are $23,750.

The scheduled balance remains $25,000. With 60 monthly payments and a monthly stated rate of 10% / 12, the fixed payment is about $531.18. Total scheduled payments are about $31,870.57, so total borrowing cost measured against net proceeds is about $8,120.57. Solving for the discount rate that equates $23,750 of proceeds with the 60 payments gives a fee-adjusted APR of about 12.24%, or about 2.24 percentage points above the stated rate.