education · 5 MIN
APR vs interest rate: plain-English guide
Why APR is the better number for comparing loans.
Interest rate is the raw cost of borrowing
It is the percentage applied to your principal. Alone, it does not capture fees.
APR folds in many costs
APR estimates the yearly cost including certain fees. When comparing lenders, APR is usually more useful than rate alone.
Still read the fee list
Not every fee is in every APR calculation the same way. Always review origination fees, points, and prepayment penalties.
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