finance
annual percentage rate
The annual percentage rate (APR) expresses the total yearly cost of a loan as a percentage, including the interest rate plus certain finance charges such as discount points, origination fees, and mortgage insurance. Because it includes these costs, the APR is usually higher than the note rate. Federal law under the Truth in Lending Act requires lenders to disclose the APR so borrowers can compare loan offers fairly.
- Exam tip
- APR is generally higher than the stated interest rate because it includes fees. It is a required disclosure under TILA and Regulation Z.
- Example
- Two loans both have a 6.5% interest rate, but one has two discount points. That loan shows a higher APR, such as 6.8%.
Related terms & state variants
Sources
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Last verified: 2026-10-23