1. What is APR?

APR (Annual Percentage Rate) represents the annual cost of borrowing money, expressed as a percentage. It includes interest and other fees, providing a comprehensive view of loan costs.

2. How Does the Calculator Work?

The calculator uses the APR formula:

Where:

• \( Total\ Interest \) — Total interest paid over the loan period
• \( Principal \) — Original loan amount
• \( Loan\ Days \) — Duration of the loan in days

Explanation: This formula calculates the annualized percentage rate by scaling the interest proportion to a full year (365 days).

3. Importance of APR Calculation

Details: APR helps borrowers compare different loan offers accurately, as it standardizes the cost of borrowing regardless of loan term or fee structure.

4. Using the Calculator

Tips: Enter total interest in currency, principal amount in currency, and loan duration in days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between APR and interest rate?
A: Interest rate is the cost of borrowing principal only, while APR includes additional fees and charges, giving a more complete cost picture.

Q2: What is considered a good APR?
A: Good APRs vary by loan type and creditworthiness. Generally, lower APRs are better. For personal loans, rates below 10% are often considered good.

Q3: Does APR include all loan costs?
A: APR typically includes interest and most fees, but may exclude some charges like late payment fees or optional insurance.

Q4: Why use 365 days in the calculation?
A: 365 days represents a full calendar year, providing an accurate annualized rate regardless of the actual loan duration.

Q5: Can APR be negative?
A: No, APR cannot be negative as it represents the cost of borrowing. Negative values would indicate being paid to borrow, which doesn't occur in standard lending.