How LoWi estimates borrowing cost per year

Cash flows

• On the disbursement date: loan principal minus upfront lender fees.
• On every payment date: the scheduled payment, including recurring fees, as an outflow.
• Insurance is included only when the user explicitly enters it in a comparison scenario.

Formula

Σ CFᵢ / (1 + r)^((dateᵢ − date₀) / 365) = 0

Actual calendar-day distance is used between the disbursement and each payment date. LoWi finds r numerically; the displayed result is r × 100%.

Worked example

If a borrower receives 1,000 on 1 January 2026 and repays 1,100 on 1 January 2027, the estimate is 10.00%. If a 100 upfront fee reduces net proceeds to 900 while repayment remains 1,100, the estimate rises to 22.22%.

Limitations

• This is not the lender’s official APR and is not a regulatory disclosure.
• The payment schedule uses a monthly interest model. Banks may use daily accrual, business-day shifts, leap-year rules, and different rounding.
• Only costs entered by the user are included; taxes, optional products, penalties, and unknown third-party costs are excluded.
• Unusual cash flows may have no unique rate. In that case LoWi shows that the value cannot be calculated.

Official context

The CFPB explains that APR is broader than an interest rate because it may include points, broker fees, and other charges. Rules depend on jurisdiction and product.