by Julia Guardione

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

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

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Rising above when market conditions get tough There is no shortage of data documenting rising delinquency rates, losses trending upward, and dropping collateral values. The near prime to subprime market has seen the worst performance and has been grabbing the headlines as of late. We have also seen reaction to current market conditions with some…

by Julia Guardione

Do you qualify to refinance?

[su_lead]Some people may avoid applying for auto refinancing because they are uncertain about whether or not they qualify. However, getting approved for a new auto loan might not be as difficult as you think.[/su_lead] A common misconception is that credit score is king - that it is the main determining factor for loan approvals, offers,…

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