Annual Percentage Rate (APR) is an expression of the effective interest rate that the borrower will pay on a loan, taking into account one-time fees and standardizing the way the rate is expressed.

In other words the APR is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted.

APR is intended to make it easier to compare lenders and loan options.

The APR is likely to differ from the note rate or headline rate advertised by the lender, due to the addition of other fees that may need to be included in the APR.

Lenders are required to disclose the APR before the loan (or credit application) is finalized.

Credit card companies can advertise monthly interest rates, but they are required to clearly state the annual percentage rate before an agreement is signed.

APR is a term used with regards to deposit accounts as well. However, when dealing with deposit accounts, Annual Percentage Yield APY or Annual Equivalent Rate AER is the number to be quoted to consumers for comparison purposes.

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