What are interest rate and APR?

The interest rate is the cost of borrowing money and is used to calculate the monthly payment to your lender. The lower the interest rate, the lower your monthly payment. The APR (annual percentage rate) is the interest rate plus other fees associated with your loan, including certain processing and closing fees. Because the APR includes other fees, it gives you a better idea of the true cost of the loan. Compare the APR when you’re deciding among multiple lenders, but be sure to compare the actual interest rate, as well.