What Is APR?
APR (Annual Percentage Rate) explained — what it includes, how it differs from interest rate and APY, and how to read it on loans and cards.
Reviewed Jan 15, 2025
Quick answer
APR is the yearly cost of borrowing money expressed as a percentage. It includes the interest rate plus most mandatory fees — but does not factor in compounding within the year.
What APR includes
- The base interest rate.
- Most lender fees that are required to get the loan.
- Excludes optional add-ons and (in most cases) compounding.
How to use APR when shopping
When comparing two loans of the same type and term, the lower APR is almost always cheaper. For revolving credit (like cards), compare APYs instead — they reflect compounding.