What is APR and how does it differ from interest rate?

APR (Annual Percentage Rate) is the true cost of borrowing, including both the interest rate and fees like origination points. The nominal rate only reflects the interest charge, making APR the more accurate comparison metric.

Why should I compare APR instead of interest rates?

A lower interest rate loan with high fees can cost more overall than a slightly higher rate with no fees. APR standardizes the comparison by including all costs.

Are lenders required to disclose APR?

Yes. Under the Truth in Lending Act (TILA), lenders must disclose the APR on all consumer loans so borrowers can make informed comparisons.

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APR Calculator

Calculate the true Annual Percentage Rate including fees and costs.

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APR vs. Interest Rate

The Annual Percentage Rate (APR) represents the true cost of borrowing by including both the interest rate and any fees charged by the lender. While two loans may have the same nominal rate, the one with higher fees will have a higher APR. Our Payment Calculator can help you understand the monthly cost before factoring in fees.

When comparing loan offers, always compare APRs rather than nominal rates. A lower rate with higher fees might cost more overall. Use our Interest Rate Calculator to solve for the implied rate given present and future values.

Federally, lenders are required to disclose APR on all consumer loans under the Truth in Lending Act, making it the most important number for loan comparisons.

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For a related calculation, use Interest Rate Calculator to solve for the required interest rate given present value, future value, and time period. Alternatively, use Refinance Calculator to compare current vs. new loan terms to calculate monthly savings and break-even point.

For the underlying method, read Refinancing Your Mortgage: When It Makes Sense.