APR (Annual Percentage Rate)
The total yearly cost of borrowing money, including interest and fees, expressed as a percentage.
What You Need to Know
APR represents the true cost of a loan by including both the interest rate and additional fees like origination charges, closing costs, and insurance. Unlike a simple interest rate, APR gives you a complete picture of what you'll pay annually.
For example, a car loan with a 5% interest rate might have a 5.5% APR when you factor in the $500 origination fee. Credit cards typically advertise APR rather than interest rates because it's more comprehensive.
Key Point: A lower APR saves you money. Compare APRs when shopping for loans, mortgages, or credit cards—not just the interest rate.
Sources & References
This information is sourced from authoritative government and academic institutions:
- consumerfinance.gov
https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-mortgage-interest-rate-and-an-apr-en-135/
- federalreserve.gov
https://www.federalreserve.gov/creditcard/interest_rates.htm
Related Calculators & Tools
Put your knowledge into action with these interactive tools:
Credit Card Interest Calculator
Calculate daily credit card interest charges. See how much interest you pay per day and per month. Free credit card calculator.
APR Reality Check
See the real monthly and daily cost of carrying credit card balances
APR to Daily Cost Converter
Translate APR into relatable daily interest costs with comparisons
Related Terms in Debt & Credit
Amortization
The process of paying off a loan through regular payments that cover both principal and interest.
Annual Fee
Yearly charge for having a credit card—$0 to $550+. Premium cards charge fees but offer rewards that can exceed cost for high spenders.
BNPL (Buy Now, Pay Later)
A short-term financing option that lets you split purchases into installment payments (usually 4 payments over 6 weeks) with little or no interest—if you pay on time.
Balance Transfer
Moving credit card debt from one card to another, typically to take advantage of a lower interest rate or 0% promotional APR.
Balance Transfer Fee
One-time charge (3-5%) to transfer debt to 0% APR card. $5K balance = $150-250 fee. Must save more than fee to make transfer worthwhile.
Balloon Payment
A large lump-sum payment due at the end of some loans after a period of smaller monthly payments.