APR vs interest rate
The interest rate tells you what you pay to borrow the balance. The APR, annual percentage rate, aims to show the yearly cost of the loan including certain fees. Two loans with the same rate can have very different APRs.
A worked example
Borrow 10,000 at 8% for 36 months and the payment is 313.36. If the lender keeps a 300 fee, you receive only 9,700 but still make the same payments. Measured against what you received, the yearly cost is about 10.08% rather than 8%.
| Same 300 fee on 10,000 at 8% | Payment | Estimated APR |
|---|---|---|
| 12 months | 869.88 | about 13.77% |
| 36 months | 313.36 | about 10.08% |
The fee has a bigger effect on the short loan because it is spread over fewer payments.
Comparing offers
- Compare APRs for the same amount and term.
- Ask which fees are included. Rules on which charges count toward APR depend on the country and the type of loan.
- Look at the total of payments as well as the monthly amount.
- Check for prepayment penalties if you plan to pay early.
Estimate your own offers with the APR and loan fees calculator, and check the lender's official disclosure before deciding.
Reviewed October 2026 · How we build our calculators · Report an issue