What is the difference between interest rate and APR?

The short answer

The rate sets your payment. The APR folds in lender costs to show the loan's total cost, which makes it useful for comparing offers.

4 min read

Rate drives the payment

Your interest rate is the number used to calculate principal and interest each month. It is the figure that determines the payment you live with.

APR is a disclosure. It takes the rate and adds certain financing costs, then expresses the whole thing as an annualized percentage.

When APR helps and when it misleads

APR is useful for comparing two offers with similar structures. A meaningfully higher APR next to the same rate usually signals higher lender fees or points.

It misleads when you will not keep the loan long. APR assumes you hold to term. If you plan to sell or refinance in five years, compare five year total cost instead: payments plus upfront costs, minus remaining balance difference.

Corie Adams Lending Team

Corie Adams
Producing Branch Manager · NMLS #1875205
Network Funding, LP · NMLS ID #2297

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Disclaimers, assumptions, and state licenses

Corie Adams Lending Team is a branch of Network Funding, LP. Network Funding, LP, NMLS ID #2297, is an Equal Housing Opportunity Lender. Licensing and state disclosures are available through Disclosures & Licensing and NMLS Consumer Access (www.nmlsconsumeraccess.org). This website is not a commitment to lend. Rates, programs, payments, and qualification requirements are subject to change without notice and may vary based on individual circumstances.

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