what is the difference between interest rate and apr

When you get any sort of loan, you are going to see terms like "interest rate" and "APR." Many of us treat these terms as virtually identical, but the truth is that they are different in subtle ways.

Compare interest rate to interest rate and APR to APR. That’s your best way to get an accurate, apples-to-apples comparison. And keep in mind that of the two rates, the APR is the more comprehensive one, since it’s a broader measure: It reflects the interest rate and other fees that you’ll end up paying.

A mortgage annual percentage rate (APR) is the interest rate plus other costs associated with a mortgage, including discount points and lender fees. This is why an APR is typically higher than the simple interest rate.

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As a numerical example of how interest rate and APR are different, let’s say that you’re obtaining a $20,000 personal loan with a three-year term, with an interest rate of 6.99%, and a $500.

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The difference between an interest rate and an APR may be good to know for many types of loans, but when it comes to your credit card, there’s no difference at all. Read more here about understanding credit card interest rates.

2 days ago. Get the facts about annual percentage rates (APR) and the impact they have on your. What's the Difference Between APR and Interest Rate?

The difference between an interest rate and an annual percentage yield relates to how the interest rate is measured. Understanding each one can help you gauge the advantages and disadvantages of certain specific financial instruments. It is best to know both the interest rate and the APY before making a decision.

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The difference Between APR and Interest Rate is simple. APR is the true cost of the loan, while the interest rate is just the amount of interest you’ll pay. The chart below is from BankRate it shows the total costs and APR over the life of a $200,000 mortgage loan. 1.5 discount points are used and cut the rate by 0.25% and added another 1.5.

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The APR includes your interest costs, as well as things like discount points, broker fees, closing costs, and other prepaid finance charges. This is why the APR is always higher than the posted interest rate. Other Differences Between APR and Interest Rate. There are also differences in how APRs and interest rates are determined.