Interest Rate vs. APR – What’s the Difference?

by Julia Guardione

Consumers often see the terms “APR” and “interest rate” in advertisements and in financial conversations and assume that they mean the same thing. Well, that assumption could cost you thousands.

Interest rates are the percentage amounts that lenders charge you to borrow money. Interest rates vary heavily by borrower, type of loan, and lending institution itself.

APR stands for Annual Percentage Rate. Though the APR does include interest rate in its calculation, it also includes other costs associated with the loan such as processing or origination fees, days until first payment, pre-paid interest, and discounts. It essentially calculates the total cost of the loan as a yearly percentage.

Interest rates are an important amount to consider because they determine your monthly payments, but APR provides a broader picture that includes both the interest and one-time costs associated with purchasing that car. All lenders are legally required to present both the interest and APR to help borrowers understand the true cost of  borrowing money, and how these fees are spread out over the life of the loan.

Understanding the difference between interest and APR can be great when comparing loan offers, as you’ll have the ability to get an accurate comparison of each loan’s actual costs, while also comparing interest rates and monthly payments.

Want to learn more?

Check out some of our other blogs!

Titles vs. Registrations

Joint Vs. Cosigned Loans

Debt-to-Income Ratios

Loan-to-Value Ratios

About The Author


Julia Guardione


Read More

by Rate Genius

Auto Refinance 101

Auto refinancing allows you to save money by lowering your interest rate on your car, truck, or SUV. What is Auto Refinance? Most people don’t know that you can refinance your car loan. Refinancing an auto loan pays off an existing loan with a new loan. Replacing an old loan with a new one can…

by Stephanie Colestock

Trucks are Refinanced More Than Any Other Vehicle on the Road: Here’s Why

Anytime you take out a loan for the purchase of a vehicle, you should plan to refinance (or refi) that loan in the future. This allows you to take advantage of a lower interest rate -- courtesy of the economy or just an improvement of your own credit score. You can also use a refi…

by Stephanie Colestock

Springtime Car Maintenance Tips

[su_heading size="27"]Winter is finally on its way out, after a long season of cold temps, ice, and snow. Since all that dreary weather can do a number on your vehicle, spring is the perfect time to tackle some auto maintenance tasks.[/su_heading] No matter where in the U.S. you live, you get to enjoy your share…

review review

Customer Reviews

Read our 10279 Certified Reviews

4.9

READ OUR REVIEWS
apply now apply now

Apply Now

Lower your interest rate and drop monthly payments by an average of $76*/month!


GET STARTED