What is the APR? 

APR stands for annual percentage rate.  The APR expresses the total cost of credit by adding the one time fees incurred on a loan transaction to the note rate.  The resulting annual percentage rate is supposed to give the consumer an idea of the true cost of credit. 

The APR is sometimes confusing for borrowers because they are quoted an interest rate for their loan but then see the APR usually being expressed as a higher number than the quoted rate.  As we mentioned, APR takes COST into consideration and that is why you will normally never see the note rate on the loan equaling the APR. 

The APR is supposed to be means to compare different loan offers from different lending institutions.  The problem is not all lenders will include the same fees as costs that will affect the final APR on a loan.  The APR is a good starting point to compare loan offers when the loan type and terms are identical.  But, it’s really not a sure fire way to be certain you are choosing the best loan.

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