What Is APR (Annual Percentage Rate)?
APR is the annual cost of borrowing money, expressed as a percentage. Unlike the interest rate alone, APR includes lender fees, origination charges, and other costs — making it the most accurate way to compare loan offers.
APR vs. Interest Rate
| Interest Rate | APR | |
|---|---|---|
| What it measures | Cost of borrowing principal only | Full cost including fees |
| Includes fees? | No | Yes |
| Which is higher? | Always lower | Always equal or higher |
| Best for comparing | Monthly payment size | Total cost of loan |
Example: Lender A offers 6.9% interest with $2,000 in origination fees. Lender B offers 7.2% with no fees. On a $200,000 / 30-year mortgage, Lender B may have a lower APR and cost less overall despite the higher stated rate.
What's Included in APR?
→Interest rate
→Origination fees
→Discount points
→Mortgage broker fees
→Certain closing costs (mortgages)
→Prepaid interest
Not included: appraisal fees, title insurance, recording fees, or escrow deposits.
Typical APR Ranges by Loan Type
| Loan Type | Typical APR Range |
|---|---|
| 30-year fixed mortgage | 6.5–8.0% |
| 15-year fixed mortgage | 6.0–7.5% |
| Personal loan (excellent credit) | 6–12% |
| Personal loan (fair credit) | 18–28% |
| Credit card | 18–29% |
| Auto loan (new) | 5–10% |