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The APR (Annual Percentage Rate) represents the true cost of borrowing by including both the interest rate and additional fees. It is always expressed as a yearly rate and is typically higher than the stated nominal rate. Lenders are required by law to disclose APR so borrowers can compare loan offers on equal footing. A lower APR means a cheaper loan overall.
Review the inputs carefully and treat the output as an estimate. For decisions involving money, taxes, health, law, or security, compare the result with trusted professional guidance when needed.
How is APR different from interest rate?
The interest rate is the cost of borrowing the principal. APR includes the interest rate plus fees (origination, broker fees, points), expressed as an annual rate. APR gives a more complete picture of the true loan cost.
When should I compare APR vs interest rate?
Always compare APR when choosing between loans. Two loans with the same interest rate can have very different APRs if one has higher fees. For short-term loans, fees have a larger impact on APR.
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