Understanding APR: What It Tells You About a Loan
APR is the yearly cost of a loan, including interest and certain fees. It's the best single number for comparing offers, as long as you also look at the total you'll repay.
Guide · 2 min read · Reviewed: October 27, 2026
In short
- APR is the yearly cost of borrowing, including certain fees.
- If a loan has fees, its APR is higher than its interest rate.
- Use APR to compare offers, then check the total repaid.
- Small, short loans can have high APRs even with small fees.
What is APR?
APR, or annual percentage rate, is the yearly cost of borrowing expressed as a percentage. It includes the interest rate plus certain fees, such as an origination fee, so it gives a fuller picture of cost than the interest rate alone.
APR vs. interest rate
The interest rate is what the lender charges on the balance. The APR adds certain required fees. If a loan has no fees, the two are the same; if it has fees, the APR is higher.
Why APR matters
Because APR combines interest and fees on a yearly basis, it lets you compare offers with different fees and terms on equal footing.
| APR | Monthly payment | Total repaid | Total interest |
|---|---|---|---|
| 20% | $92.63 | $1,111.61 | $111.61 |
| 30% | $97.49 | $1,169.85 | $169.85 |
Hypothetical examples for illustration only. They assume no fees, so the interest rate equals the APR. They are not offers or typical rates.
For loans covered by the federal Truth in Lending Act, lenders must show you the APR and the total finance charge before you sign.
APR on small or short loans
A flat fee can look small in dollars but translate into a high APR on a small, short loan, because the cost is spread over less money and less time. That's why it's worth comparing the APR and the total you'll repay, not just the fee.
Look beyond the APR
- The total amount repaid over the full term
- The monthly payment and whether it fits your budget
- The amount you'll receive after any fees
- Late fees and prepayment penalties
APR range for offers through Tilt App: 5.99%–35.99%. See rates and terms.
Common questions
More answers in the help center.
Is a lower APR always better?
For the same amount and term, a lower APR means a lower cost. But compare the total repaid too: a lower APR over a much longer term can still cost more overall.
Does APR include all fees?
APR includes certain required fees, such as origination fees, but not every possible charge. Late fees, for example, aren't included.
What APR will I get?
It depends on the lender, your credit profile, the amount, the term and your state. 5.99%–35.99%