It’s one of the most common questions we get about loans. The answer is simple, but it’s not always easy to grasp. Essentially, APR is the effective rate of interest once you’ve added to the loan amount certain closing costs. So while the interest rate “is what it is,” APR is variable based on the closing costs of the loan.

You can use APR to better compare loan options, because especially for loans with the same interest rate, you can see how much your closing costs are impacting the overall cost.

For one of the better explanations of APR and interest rate, click here and scroll down to the third answer–it’s one of the simplest explanations we’ve read.

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Better Business Bureau - Accredited Business

Equal Housing Opportunity logo