APR (Annual Percentage Rate)

The yearly cost of borrowing, including interest and most fees, expressed as a single percentage.

APR is the interest rate on a loan plus most of the lender's upfront fees (origination fees, points, some closing costs), rolled into one annualized percentage. It exists specifically so two loans with different fee structures can be compared on equal footing.

APR is almost always higher than the loan's stated interest rate, because it accounts for costs the interest rate alone ignores. A loan with a low rate but high fees can have a higher APR than a loan with a slightly higher rate and no fees.

Worked Example

A $300,000 mortgage at 6.5% interest with $4,000 in fees might carry an APR closer to 6.65% — that gap is the fees, spread across the life of the loan.

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