Understanding APR and Interest
APR is the all-in yearly cost of borrowing — interest plus fees, expressed as a percent. It's the only number that lets you compare two loans fairly.
Interest rate ≠ APR
A 10% interest rate with a 5% origination fee on a 1-year loan is closer to a 15% APR. Lenders are legally required to disclose APR on consumer loans under TILA.
Payday-loan math
A $15 fee on a $100 two-week payday loan looks small. Annualized, it's a 391% APR. Same dollars, very different framing.
What changes APR
Three levers:
- Fees rolled into the loan (origination, processing)
- Loan term (shorter = higher APR for the same dollar fee)
- Compounding frequency (daily compounding edges APR slightly above the stated rate)
Questions
Frequently Asked Questions
Clear answers to common questions before you compare loan options or apply.
Related guides
Reviewed by Jeff Arlintogs. See our fact-checking policy.