APR (Annual Percentage Rate) is the yearly cost of borrowing money, expressed as a percentage, including most of the fees involved — not just the base interest rate.
APR vs. interest rate
The interest rate is only part of the cost of a loan. APR bundles in most upfront fees (like an origination fee) and spreads their cost over the loan, giving you a more complete yearly cost figure. Two loans with the same interest rate can have different APRs if one charges more in fees.
Why APR is the number to compare
Because APR standardizes fees and interest into one yearly percentage, it's generally the most reliable single number for comparing offers from different lenders — more reliable than comparing interest rates or monthly payments alone.
Where you'll see it
- Credit cards (often with a range, since your specific rate depends on your creditworthiness)
- Personal loans
- Auto loans
- Mortgages, where it's required to be disclosed alongside the interest rate
A quick way to use it
When comparing two offers for a similar loan amount and term, the one with the lower APR is generally the cheaper option overall — but always double check the term length is actually the same, since a lower APR over a much longer term can still cost more in total interest.