Interest rate is the cost of borrowing the principal. APR — annual percentage rate — includes the interest rate plus certain fees, expressed as an annualized percentage. APR gives you a more complete picture of what a loan actually costs.
Why APR is more useful
When comparing two loans with the same interest rate but different fee structures, APR will reveal which is actually more expensive over time.
What's typically included in APR
Origination fees and certain upfront charges are commonly factored in. Optional fees, late fees, or penalty charges are not.
How to use APR when shopping
Compare APR and total repayment side by side. The lowest monthly payment isn't always the cheapest loan.
This article is for educational purposes only and does not constitute financial, legal, or credit advice. Loan approval, rates, and terms are determined by participating lenders and are subject to eligibility, underwriting, and applicable law. Not all applicants will qualify.