APR vs APY
APR and APY are both annualized percentages, but they answer opposite questions. APR is the borrower’s measure: the annualized cost of credit, including certain fees. APY is the saver’s measure: the one-year return a deposit earns after compounding. The same nominal rate can look different through each lens, so choosing the wrong one can make a loan or a savings account look better or worse than it really is.
What each calculator does
APR calculator. The APR calculator estimates the annual percentage rate of a loan from the stated interest rate, compounding frequency, payment frequency, term, fees rolled into the balance, and fees paid up front. It solves for the periodic rate that makes the present value of the payments equal the cash the borrower actually receives, then annualizes that rate. Fees are the reason APR can sit above the note rate: the same scheduled payments become more expensive relative to the cash received.
APY calculator. The APY calculator converts a nominal annual rate, a compounding frequency, an initial deposit, and a term into the annual percentage yield, the final deposit value, and the interest earned. Because interest credited during the year starts earning its own interest, APY is higher than the nominal rate whenever compounding happens more than once a year. That is why banks advertise savings accounts, certificates of deposit, and money market accounts with APY.
Side-by-side
| APR | APY | |
|---|---|---|
| Full name | Annual percentage rate | Annual percentage yield |
| Perspective | Borrower — cost of credit | Saver — return on deposits |
| What it includes | Stated rate, compounding, payment frequency, rolled-in and up-front fees | Stated rate and compounding frequency |
| Compared with the stated rate | Often higher when fees are involved | Higher whenever compounding is more frequent than annually |
| Typical place you see it | Loan and credit-card disclosures | Savings accounts, CDs, money market accounts |
| Question it answers | What does this loan cost per year? | What will this deposit earn after compounding? |
When to use which
Use APR when you are comparing borrowing offers — auto loans, mortgages, credit cards, personal loans. It puts offers with different rates, terms, and fee structures on a more comparable footing than the headline note rate alone. Lenders may follow detailed rules about which charges count as finance charges, so treat the calculator’s estimate as educational and confirm with official loan documents.
Use APY when you are comparing where to park cash. APY already includes the compounding effect, which makes accounts with different compounding schedules directly comparable. It does not include account fees, early-withdrawal penalties, or taxes, so the return you actually keep can be lower.
The two calculators share the same compounding math; the difference is the question being asked. If you want the neutral rate conversion without the borrower-or-saver framing, the EAR calculator computes the effective annual rate from a nominal rate and a compounding frequency.
Try them side by side
- APR calculator — estimate the annual cost of a loan, including fees.
- APY calculator — see what a deposit earns after compounding.