APR (Annual Percentage Rate)
The yearly cost of borrowing including interest and mandatory fees - the truth-in-lending number.
The yearly cost of borrowing including interest and mandatory fees - the truth-in-lending number.
APR is the borrower's counterpart to APY: it annualises the interest rate plus certain upfront fees required to get the loan, so two offers with the same note rate can carry different APRs once origination fees enter. Regulated lenders must disclose it under the Truth in Lending Act, which is what makes it comparable across mortgages, cards and personal loans - unlike promotional rates that quote interest alone.
APR has two standard forms. Simple APR ignores compounding within the year; a mortgage's Truth in Lending APR compounds monthly and can read slightly above the effective cost, while credit cards must now quote a periodic rate multiplied the way it actually accrues. For fixed loans the number is a reliable comparison; for cards it assumes you carry no balance beyond the statement cycle - pay in full and interest is zero regardless of the printed APR.
Worked example
Two $300,000 mortgages both quote 6.5%, but one charges a $6,000 origination fee: that fee alone adds roughly 0.25 points of APR over a 30-year schedule, so the cheaper-looking rate is the more expensive loan.
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