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GlossaryReference

APR

The yearly cost of borrowing money, including interest and most fees, shown as a percentage.

What APR means

APR stands for Annual Percentage Rate. It measures the true yearly cost of borrowing money, expressed as a percentage of the amount borrowed. Unlike a simple interest rate, the APR usually includes most fees charged by the lender, so it gives a fairer comparison between loans and credit cards. A higher APR means you pay more over the life of the loan.

Example

A $5,000 personal loan at 12% APR repaid over 48 months costs roughly $1,324 in interest over the full term — about $132 more every year than a 9% APR loan on the same balance.

Related terms

InterestAPYPrincipalCredit Score

Disclaimer

Definitions are simplified for educational use and are not personalized financial, investment, tax or legal advice.

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Frequently asked questions

Not quite. The interest rate is what the lender charges on the outstanding balance; the APR folds most fees into that number and expresses the total as a yearly percentage. That makes APR the fairer figure for comparing offers, because a loan with a low rate but high fees can cost more than a loan with a slightly higher rate and no fees. For very short loans the APR can understate the true cost, so it is still worth reading the terms.

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