What is APR vs interest rate?

The interest rate is the annual rate the lender charges on the amount you borrow. It directly affects your monthly principal and interest payment. APR (annual percentage rate) includes the interest rate plus certain upfront fees spread over the life of the loan.

Lenders are required to disclose APR on the Loan Estimate and Closing Disclosure. Because it standardizes how costs are presented, APR lets you compare offers from different lenders on a more level basis than the interest rate alone.

A loan with a slightly higher rate but lower fees might have a lower APR and cost less over time. APR does not include every fee (e.g. title, appraisal) and assumes you keep the loan for the full term, so it’s a useful comparison tool, not a perfect one.

When comparing quotes, look at both the interest rate and the APR. Enter each lender’s numbers into a comparison view so you can see how rate and APR differ across offers.