What is APR vs interest rate?

The interest rate is the cost of borrowing the principal. APR includes the interest rate PLUS fees (origination fees, mortgage points, etc.) expressed as a yearly rate. APR is always ≥ the interest rate. For mortgages, the difference can be 0.1–0.5%. For short-term loans with high fees, APR can be dramatically higher than the stated rate.

How do I compare loans using APR?

Use APR to compare loans on an apples-to-apples basis. A loan with 5% interest and $1,000 in fees may have a higher APR than a 5.2% loan with no fees. The one with lower APR costs less overall, assuming the same term. For short-term loans, fees dominate; for long-term loans, the interest rate matters more.