Definition: APR expresses the cost of credit as a yearly rate that includes interest and certain loan charges. It is a broader borrowing-cost measure than the note’s interest rate alone.
Example
Two loan offers show the same interest rate but different loan fees. Their APRs may differ even though their stated interest rates match.
Keep the distinction clear
APR is not the rate used to calculate the regular interest charge on the principal balance, and it does not include every possible closing cost. Compare similar loan terms; an ARM’s APR does not show its maximum future rate.
Related terms
Interest · Discount Points · Adjustable-Rate Mortgage (ARM)
Keep studying
Discount Points: Borrower Cost and Approximate Lender Yield
References: CFPB: Interest rate and APR
Pronunciation (US): AN-yoo-uhl per-SEN-tij RAYT; APR: ay-pee-AR (capitals show stress)
Pronunciation reference: Merriam-Webster
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