APR vs. interest rate

Loan offers usually show two percentages: the interest rate and the annual percentage rate (APR). They look alike, but they measure different things, and mixing them up can make one offer look cheaper than it really is.

The definitions

The Consumer Financial Protection Bureau (CFPB) describes them this way:

Interest rate: the cost you pay the lender for borrowing the money, on top of the principal.
APR: a measure of the interest rate *plus* additional fees charged with the loan, such as origination charges. Both are shown as a yearly percentage.

Because the APR includes fees, it is usually higher than the interest rate when a loan has upfront charges. When a loan has no such fees, the two numbers can be close or the same.

Why the difference matters

The interest rate sets your monthly principal-and-interest payment. The APR is meant to help you compare the overall cost of borrowing across offers that have different fee structures. The CFPB notes that the federal Truth in Lending Act requires lenders to disclose the APR, which is what makes it useful for comparison, as long as you compare APR to APR and not APR to someone else's interest rate.

A worked example (illustration only)

These inputs are hypothetical and are not current rates or typical fees. The APR here is a simplified estimate: it treats the fees as reducing the money you actually receive and solves for the rate that matches the same payment. Official APRs follow federal disclosure rules and can differ. Always use the APR printed on your disclosure.

Mortgage

$200,000 at a 6.0% interest rate for 30 years, with $4,000 of fees that count toward the APR.

Monthly principal-and-interest payment (from the interest rate): $1,199.10
Simplified APR: about 6.19%

Personal loan

$10,000 at a 12% interest rate for 36 months, with a $500 fee taken out of the loan proceeds, so you receive $9,500.

Monthly payment: $332.14
Simplified APR: about 15.61%
The same loan and fee over 60 months: payment $222.44, simplified APR about 14.28%

The personal loan example shows how an upfront fee affects shorter loans more: the fee is spread over fewer years, so it adds more to the annualized cost.

Which number to enter in the calculator

The calculator on this site uses a single rate field labeled "Interest rate (APR %)".

To match a lender's monthly payment, enter the note interest rate from your offer. The payment is based on that rate and the loan amount.
To get a rough sense of the all-in cost, you can re-run it with the APR. Keep in mind this is an approximation. The payment it shows will be a little higher than your actual payment, because the fees are usually paid at closing or taken out of the loan proceeds rather than charged as interest. In the mortgage example above, the payment calculated at 6.19% would be $1,223.57 instead of $1,199.10.

What APR does not capture

Costs that are not finance charges. The APR is built from the finance charge defined in Regulation Z (12 CFR 1026.4). That includes interest, points, loan fees, and premiums for insurance that protects the lender against default, such as mortgage insurance. For mortgages, certain real-estate fees are excluded if they are bona fide and reasonable, including title, appraisal, credit-report, notary, and document-preparation fees. Property taxes imposed on the borrower are not finance charges either, so these costs are not reflected in the APR. (Source: CFPB, Regulation Z § 1026.4, https://www.consumerfinance.gov/rules-policy/regulations/1026/4/, checked 2026-09-25.)
Rate changes on adjustable-rate loans. The APR on an adjustable-rate loan is based on assumptions and may not match what you actually pay over time.
Paying off early. Since the APR spreads upfront fees over the full term, a loan with high fees costs more per year than its APR suggests if you refinance or pay it off early.
Promotional rates. An "as low as" rate in an ad is not your rate. Your rate depends on your credit, the loan amount, the term, and the lender.

How to compare offers

Get written disclosures from more than one lender: a Loan Estimate for most mortgages, or the Truth in Lending disclosure for other loans.
Line up the same loan amount and term.
Compare APR to APR, then look at the monthly payment, fees, and total cost.
Ask about prepayment penalties and whether any fees are optional.

The CFPB also notes that lenders are not required to offer you their best rate, so shopping around and comparing offers is one of the best ways to lower your cost.

Run each offer through the loan calculator, or use the 30-year mortgage, 15-year mortgage, auto loan, or personal loan page.

FAQ

Is a lower APR always the better deal? Usually it signals a lower overall cost over the full term, but if you expect to sell, refinance, or pay off early, upfront fees matter more than the APR shows.
Why is my APR higher than my interest rate? Because the APR includes certain fees charged with the loan, such as origination charges.
Can the APR equal the interest rate? Yes, if there are no fees that count toward the APR.
Where do I find the official APR? On the lender's required disclosures, such as the Loan Estimate for most mortgages or the Truth in Lending disclosure for other loans.

Sources (checked 2026-09-25)

CFPB, "What is the difference between a loan interest rate and the APR?" (last reviewed Aug 28, 2026): https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/
CFPB, "What is a Loan Estimate?" (last reviewed Aug 9, 2024): https://www.consumerfinance.gov/ask-cfpb/what-is-a-loan-estimate-en-1995/

Disclaimer

Estimates only. This page is educational and is not financial, lending, legal, or tax advice. Figures come from the numbers you enter and cover principal and interest only. Your actual loan terms depend on the lender, your credit, and costs such as property taxes, homeowners insurance, PMI, and fees. Before you borrow, get a Loan Estimate or other official disclosure from each lender and compare them. MyLoanCalculator.app is not a lender and does not make loan offers.