What Is APR? A Plain-English Guide
APR in one sentence
APR, or annual percentage rate, is the yearly cost of a loan expressed as a percentage, including interest and certain fees.
APR vs. interest rate
The interest rate is the cost of borrowing the money itself. APR adds certain fees, such as an origination fee, so it usually gives a fuller picture.
Why APR looks high on small loans
APR annualizes the cost. On a short, small loan, even modest dollar fees can translate into a large percentage. That is why you should also look at total dollars repaid.
How to compare offers
Compare three things side by side: APR, monthly payment and total repayment. If two loans have different terms, the total repayment is often the clearest comparison.
A quick example
Borrowing $1,000 for 12 months at a given APR creates a fixed monthly payment. Use our calculator with your offered APR to see the exact figures.
Questions to ask any lender
Is the APR fixed? Are there fees not included in the APR? Is there a penalty for repaying early? What are the late fees?
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