Loan basics
Annual percentage rate (APR)
Abbreviation: APR
Definition
The annual percentage rate (APR) expresses the yearly cost of a loan including the interest rate plus certain finance charges such as points and some lender fees. Because it spreads those costs over the loan term, APR is usually higher than the note rate and helps compare offers with different fee structures.
Annual percentage rate (APR), explained
APR is defined by the Truth in Lending Act and Regulation Z, and advertising a rate generally requires stating the APR alongside it.
Comparing APRs works best for loans with the same term that you expect to keep to maturity.
Source: CFPB — Regulation Z advertising rules (12 CFR 1026.24)
See APR in a calculator
The APR vs. Interest Rate Calculator shows how this works with real numbers. See the true APR once lender fees are included, next to the quoted note rate.
Open the APR vs. Interest Rate CalculatorRelated terms
- Discount pointsDiscount points are upfront fees paid to a lender at closing to lower a mortgage’s interest rate.
- Trigger terms (Regulation Z)Trigger terms are specific credit terms that, when used in a closed-end credit advertisement, require additional disclosures under Regulation Z (12 CFR 1026.24).
Q.01What is APR (Annual percentage rate)?
Q.02Why is APR higher than the interest rate?
Q.03Is a lower APR always better?
Explain it with their numbers
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