Interest is one part of cost
The interest rate describes the charge for borrowing the principal. APR reflects interest and certain borrowing fees as an annual percentage, so it may differ from the interest rate.
A simple illustration
Imagine two fixed-rate loans with the same principal, rate and term, but different upfront finance fees. Their principal-and-interest payments could be identical while the loan with the larger fee has a higher estimated APR. This is an illustration, not a lender offer.
Compare with context
APR is useful alongside fees, term and total repayment. Comparing a fixed-rate mortgage with an adjustable-rate mortgage takes extra care because future payments can change. The lender’s disclosures remain the source for the actual terms.
Try the estimate
Our APR calculator models one upfront fee deducted from the proceeds and equal monthly payments. Different fee treatment, irregular dates or other charges can produce a different disclosed APR.
Sources & further reading
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Educational information only. This article is not personalized financial advice or a lending decision.