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Annual percentage rate (APR): what it means

The annual percentage rate (APR) is a broader measure of the cost of borrowing money than the interest rate. Besides the interest, it includes certain loan charges, such as discount points and some lender fees, spread over the life of the loan and expressed as a yearly percentage.

In Spanish it is

Tasa de porcentaje anual (APR)

Also written as: APR

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Verified on October 16, 2026

1 official source

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The full explanation

That is why the APR is almost always a little higher than the interest rate. It is useful for comparing offers: if two loans have the same interest rate but a different APR, the one with the higher APR charges more in fees.

An example

Pedro is offered two loans with the same interest rate. He looks at the APR on each Loan Estimate and finds that one charges more fees: its APR is higher.

You will see it in…

The Loan Estimate, page 3 (“Comparisons”)
The Closing Disclosure, page 5
Loan advertisements, next to the interest rate

Words that go with it

You will rarely see this word alone. These are the ones that show up with it on the same papers.

More guides that use “annual percentage rate (APR)”

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Official sources

We sum up what these official sources say, in plain words. We add no rules they do not state; when a rule changes, the definition and its date change.

1. CFPB · Mortgages key terms: annual percentage rate (APR) (external site) · in English · Verified on October 16, 2026