Finance Charge Calculator (total cost of credit in money, with APR)

Understanding the finance charge calculator — concept and principle

This calculator finds the finance charge on a loan, the total dollar cost of credit as defined by US Truth in Lending rules, together with the interest part, prepaid finance charges, the amount financed, the monthly payment, the total of payments and the APR including fees. Use it to compare loan offers, read a Truth in Lending disclosure or see how fees raise the true cost of borrowing.

Prepaid fees reduce the amount you actually receive, which pushes the APR above the note rate.

How it is calculated

Monthly payment = loan × i ÷ (1 − (1 + i)^−n), with i = note rate ÷ 12 and n months.
Total of payments = payment × n.
Amount financed = loan amount − prepaid finance charges.
Finance charge = total of payments − amount financed = interest + prepaid finance charges.
APR = the rate at which the payments have a present value equal to the amount financed.
Finance charge per 100 financed = finance charge ÷ amount financed × 100.

The principle

Regulation Z defines the finance charge as the cost of consumer credit in dollars: interest plus fees, points and similar charges you pay because you borrow. Fees paid at the start reduce the money you actually receive, while you still repay the full loan. The APR captures this by finding the interest rate that equates what you receive with what you repay, so it is higher than the note rate whenever there are fees. Charges that everyone pays, such as application fees charged to all applicants, and late fees are excluded.

Worked example

Default inputs: loan $25,000, 7.5%, 60 months, prepaid finance charges $500.

Payment = 25,000 × 0.00625 ÷ (1 − 1.00625^−60) ≈ $500.95.
Total of payments = 500.95 × 60 ≈ $30,056.92; interest ≈ $5,056.92.
Amount financed = 25,000 − 500 = $24,500.
Finance charge = 30,056.92 − 24,500 = $5,556.92.
APR including fees ≈ 8.36%; finance charge per 100 financed ≈ 22.68.

Each point is the calculator re-run with only “Interest rate (% a year)” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Interest rate (% a year)	Finance charge
1.88	$1,709.69
3.75	$2,955.88
5.62	$4,238.37
7.5	$5,556.92
9.38	$6,911.24
11.2	$8,300.96
15	$11,184.90

How to read the result

Use the APR, not the note rate, to compare loans with different fees. The finance charge is the total dollar cost if you keep the loan to the end. Paying off early reduces interest but not the prepaid fees, so fees matter more on loans you expect to repay quickly.

Common mistakes

Comparing loans by note rate only.
Adding fees to the loan amount and forgetting they also carry interest.
Counting late fees or optional products as part of the finance charge.
Assuming the APR includes every possible cost; it includes finance charges as defined by the rules.

Keep in mind: Disclosure rules differ outside the US; in Korea, lenders disclose rates and fees under their own regulations. Check your loan documents. This is not financial or legal advice.

Frequently asked questions

What is included in the finance charge?

Interest, loan fees, points, required credit insurance and similar charges imposed because you borrow.

Why is the APR higher than the interest rate?

Because prepaid fees reduce the amount you receive while payments stay the same.

Are application fees part of the finance charge?

Not if they are charged to all applicants whether or not credit is given.

Sources: Consumer Financial Protection Bureau, Regulation Z, 12 CFR 1026.4 "Finance charge"

Checked 9 Nov 2026. Consumer Financial Protection Bureau, Regulation Z (12 CFR 1026.4) “Finance charge”: the cost of consumer credit as a dollar amount; examples (interest, service charges, points, loan fees, credit insurance premiums) and exclusions (application fees charged to all applicants, late fees, participation fees). Amount financed, total of payments and actuarial APR: standard loan arithmetic.

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