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APR (annual percentage rate)

APR (annual percentage rate) expresses the cost of borrowing as a yearly percentage. On many fixed-term loans, it reflects the interest rate plus certain fees charged when the loan is made; on a credit card, it is the annualized interest rate.

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How it works

Because APR puts borrowing costs on the same yearly scale, it helps you line up offers. On many fixed-term loans, including auto loans, the APR also accounts for certain fees charged when the loan is made, such as origination charges. That is why a loan’s APR can be higher than its interest rate, and why an offer with a low rate and high fees may not be the cheaper one.

Lenders must disclose the APR, which makes it a useful comparison tool as long as you compare APR with APR, not one offer’s APR with another offer’s interest rate. Two loans with the same APR can still differ in length, monthly payment, and total interest, so those figures are worth reading alongside it.

On a credit card, APR is an annualized interest rate applied to balances on the account. One card can have more than one APR, such as a rate for purchases and a different rate for cash advances, so which balance a rate applies to matters as much as the number itself.

Try it with your own numbersLoan Payment CalculatorFree loan payment calculator for fixed-rate car, personal and consolidation loans. See the monthly payment, total interest and how the term changes both.

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Sources and further reading

Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.

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