{"id":5209,"date":"2019-02-11T16:54:36","date_gmt":"2019-02-11T21:54:36","guid":{"rendered":"http:\/\/www.avant.com/blog\/?p=5209"},"modified":"2022-12-07T13:33:36","modified_gmt":"2022-12-07T18:33:36","slug":"whats-the-difference-between-apr-and-interest-rate","status":"publish","type":"post","link":"https:\/\/www.avant.com\/blog\/borrow\/whats-the-difference-between-apr-and-interest-rate\/","title":{"rendered":"What\u2019s the Difference Between APR and Interest Rate?"},"content":{"rendered":"<p><b><\/b><span style=\"font-weight: 400;\">If you\u2019re applying for any type of loan, the first thing you\u2019ll probably look at is the interest rate. Further down the application, you\u2019ll also see a term called an APR (annual percentage rate). These two numbers may be similar, but the truth is that they\u2019re different in subtle ways. By understanding the difference between these two terms, you can have a better insight on how much you\u2019re <\/span><i><span style=\"font-weight: 400;\">really<\/span><\/i><span style=\"font-weight: 400;\"> paying for a loan.<\/span><\/p>\n<h3><b>APR vs Interest Rate on a Home Loan<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">An interest rate is the nominal cost of borrowing money. When you receive a quote from a mortgage broker for a home loan (or refinance), you will be quoted based on the interest rate. The interest rate is what effects the <\/span><i><span style=\"font-weight: 400;\">actual <\/span><\/i><span style=\"font-weight: 400;\">payment amount of your loan. The APR can be found on the TIL (truth-in-lending) statement which will take into account all the other fees associated with your mortgage application. These include origination points charged by the broker, closing costs, broker fees, and even title fees. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">If you\u2019re comparing different mortgage lenders, the number you should look at is the APR. Looking at the APR will give you a holistic view of the true cost of the loan. However, you\u2019ll need to be a little more cautious if you\u2019re applying for an adjustable rate mortgage since it doesn\u2019t take into account any future changes. <\/span><\/p>\n<h3><b>APR vs Interest Rate with Credit Cards<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">It\u2019s also important to understand what an <a href=\"https:\/\/www.avant.com\/blog\/borrow\/what-does-apr-mean-for-credit-cards\/\">APR<\/a> is when it comes to your credit card interest rate. The APR is the interest rate you are charged on an annual basis. However, the APR does not take into account for what happens when interest is compounded on a monthly or daily basis. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">As discussed above, if you\u2019re shopping for a mortgage, it\u2019s best to look at the APR. On the other hand, credit cards should be looked at differently. There\u2019s a term called annual percentage yield (APY) that actually takes into account any compounding interest. When you\u2019re looking at the fine print on a credit card offer, make sure you look for the APY since the APR is the number that creditors like to emphasize. <\/span><\/p>\n<h3><b>Limitations on APR<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Now that we know that the APR encompasses all the fees that go into a loan, one limitation on your APR is the unknown variable of how long you plan to keep the loan for. For example, if you\u2019re comparing two mortgages but you only plan to stay in your home for 3-4 years, a lower APR might be more expensive. This is because you\u2019re paying more in upfront fees whereas the higher interest rate loan will have less. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">When comparing two different loans side by side, there are many factors to look into. The APR will give you a holistic view of the cost of the loan whereas the interest rate will reflect the actual monthly payment. Always consider the not so obvious factors such as how long you plan on keeping the loan since this can influence your decision. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re applying for any type of loan, the first thing you\u2019ll probably look at is the interest rate. Further down the application, you\u2019ll also see a term called an APR (annual percentage rate). These two numbers may be similar, but the truth is that they\u2019re different in subtle ways. By understanding the difference between [&hellip;]<\/p>\n","protected":false},"author":38,"featured_media":24607,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"ocean_post_layout":"","ocean_both_sidebars_style":"","ocean_both_sidebars_content_width":0,"ocean_both_sidebars_sidebars_width":0,"ocean_sidebar":"0","ocean_second_sidebar":"0","ocean_disable_margins":"enable","ocean_add_body_class":"","ocean_shortcode_before_top_bar":"","ocean_shortcode_after_top_bar":"","ocean_shortcode_before_header":"","ocean_shortcode_after_header":"","ocean_has_shortcode":"","ocean_shortcode_after_title":"","ocean_shortcode_before_footer_widgets":"","ocean_shortcode_after_footer_widgets":"","ocean_shortcode_before_footer_bottom":"","ocean_shortcode_after_footer_bottom":"","ocean_display_top_bar":"default","ocean_display_header":"default","ocean_header_style":"","ocean_center_header_left_menu":"0","ocean_custom_header_template":"0","ocean_custom_logo":0,"ocean_custom_retina_logo":0,"ocean_custom_logo_max_width":0,"ocean_custom_logo_tablet_max_width":0,"ocean_custom_logo_mobile_max_width":0,"ocean_custom_logo_max_height":0,"ocean_custom_logo_tablet_max_height":0,"ocean_custom_logo_mobile_max_height":0,"ocean_header_custom_menu":"0","ocean_menu_typo_font_family":"0","ocean_menu_typo_font_subset":"","ocean_menu_typo_font_size":0,"ocean_menu_typo_font_size_tablet":0,"ocean_menu_typo_font_size_mobile":0,"ocean_menu_typo_font_size_unit":"px","ocean_menu_typo_font_weight":"","ocean_menu_typo_font_weight_tablet":"","ocean_menu_typo_font_weight_mobile":"","ocean_menu_typo_transform":"","ocean_menu_typo_transform_tablet":"","ocean_menu_typo_transform_mobile":"","ocean_menu_typo_line_height":0,"ocean_menu_typo_line_height_tablet":0,"ocean_menu_typo_line_height_mobile":0,"ocean_menu_typo_line_height_unit":"","ocean_menu_typo_spacing":0,"ocean_menu_typo_spacing_tablet":0,"ocean_menu_typo_spacing_mobile":0,"ocean_menu_typo_spacing_unit":"","ocean_menu_link_color":"","ocean_menu_link_color_hover":"","ocean_menu_link_color_active":"","ocean_menu_link_background":"","ocean_menu_link_hover_background":"","ocean_menu_link_active_background":"","ocean_menu_social_links_bg":"","ocean_menu_social_hover_links_bg":"","ocean_menu_social_links_color":"","ocean_menu_social_hover_links_color":"","ocean_disable_title":"default","ocean_disable_heading":"default","ocean_post_title":"","ocean_post_subheading":"","ocean_post_title_style":"","ocean_post_title_background_color":"","ocean_post_title_background":0,"ocean_post_title_bg_image_position":"","ocean_post_title_bg_image_attachment":"","ocean_post_title_bg_image_repeat":"","ocean_post_title_bg_image_size":"","ocean_post_title_height":0,"ocean_post_title_bg_overlay":0.5,"ocean_post_title_bg_overlay_color":"","ocean_disable_breadcrumbs":"default","ocean_breadcrumbs_color":"","ocean_breadcrumbs_separator_color":"","ocean_breadcrumbs_links_color":"","ocean_breadcrumbs_links_hover_color":"","ocean_display_footer_widgets":"default","ocean_display_footer_bottom":"default","ocean_custom_footer_template":"0","ocean_post_oembed":"","ocean_post_self_hosted_media":"","ocean_post_video_embed":"","ocean_link_format":"","ocean_link_format_target":"self","ocean_quote_format":"","ocean_quote_format_link":"post","ocean_gallery_link_images":"off","ocean_gallery_id":[],"footnotes":""},"categories":[1421],"tags":[],"class_list":["post-5209","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-borrow","entry","has-media"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What\u2019s the Difference Between APR and Interest Rate? - The Avant Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.avant.com\/blog\/wp-json\/wp\/v2\/posts\/5209\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What\u2019s the Difference Between APR and Interest Rate? - The Avant Blog\" \/>\n<meta property=\"og:description\" content=\"If you\u2019re applying for any type of loan, the first thing you\u2019ll probably look at is the interest rate. 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