Simple Definition
APR, or Annual Percentage Rate, shows the approximate yearly cost of a loan. It generally includes the interest rate and some charges, so it can help borrowers compare loan offers more clearly.
Why It Matters
APR matters because two loans with the same interest rate may still have different total costs if processing fees or other charges are different.
Example
If one personal loan has a lower interest rate but a higher processing fee, the APR helps you understand whether it is actually cheaper than another loan.
FAQs on APR
Is APR the same as interest rate?
No. Interest rate is the cost charged on the loan amount, while APR gives a broader yearly cost view including interest and certain charges.
Why should I compare APR?
APR helps you compare loan offers more fairly because it reflects more than just the headline interest rate.