APR (Annual Percentage Rate)
The yearly cost of borrowing including interest and fees, expressed as a percentage.
APR includes the interest rate plus lender fees, points, and other costs spread over the loan term. A mortgage with a 6.5% interest rate and $3,000 in fees might have a 6.7% APR. Compare APRs — not just interest rates — when shopping for loans, because APR captures the true cost of borrowing.
APR vs Interest Rate
The interest rate is what the lender charges on the principal balance. APR wraps in additional costs. Two loans with the same interest rate can have different APRs if one charges higher fees. Federal law requires lenders to disclose APR so borrowers can make apples-to-apples comparisons.
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