APR vs Interest Rate
APR vs Interest Rate
The interest rate shows the basic cost of borrowing money.
APR can provide a broader measure because certain finance charges may be reflected in it.
Example
| Feature | Loan A | Loan B |
|---|---|---|
| Interest rate | 9% | 10% |
| Origination fee | 5% | 0% |
| Term | 36 months | 36 months |
Looking only at the rate makes Loan A appear cheaper, but fees can change the comparison.
A useful next step is to review the total scheduled repayment and the amount that actually reaches your bank account.
Read more: What an Annual Percentage Rate Really Tells You About a Small Loan
Related: comparing-personal-loans
