Identify the loan amount, interest rate, fees, and loan term
Add all required upfront and recurring loan costs to the interest cost
Convert all costs into a yearly rate based on the loan balance and term
Use the formula: APR = (Total finance charges / Loan amount / Number of years) × 100
For a more exact result, solve for the annual rate that makes the present value of all payments equal the amount borrowed
Include points, origination fees, closing costs, and other mandatory charges
Exclude optional fees and late payment charges
Compare the APR to the nominal interest rate to see the full borrowing cost