APR (Annual Percentage Rate) is the total annualized cost of borrowing expressed as a percentage — including the interest rate plus any prepaid finance charges (origination fees, points, etc.). APR is what regulators require lenders to disclose for apples-to-apples comparison.
APR is the standardized lending-cost disclosure required by the Truth in Lending Act (TILA). It's always equal to or higher than the simple interest rate because it includes fees that increase the effective borrowing cost. Example: a 10% interest rate loan with a 5% origination fee has an APR meaningfully above 10% — the fee is amortized over the loan term and added to the annualized cost. Compare APR (not interest rate) across loan offers. APR vs APY: APR doesn't account for compounding within a year. APY (Annual Percentage Yield) does. For savings accounts, banks disclose APY. For loans, lenders disclose APR. Both are annualized, but APY > APR for the same nominal rate with monthly compounding. Limitations of APR: doesn't capture the time-value impact of variable-rate loans (the disclosed APR reflects current rate assumptions), doesn't capture penalty APRs that kick in after late payments, doesn't capture credit card APR variations (purchases vs cash advances vs balance transfers can have different APRs on the same card). APR calculation methodology is defined by Regulation Z (12 CFR Part 1026 — https://www.consumerfinance.gov/rules-policy/regulations/1026/) as implemented by the CFPB. The Federal Reserve publishes consumer credit rates data in its G.19 statistical release (https://www.federalreserve.gov/releases/g19/).
No. Interest rate is the simple percentage charged on the principal. APR includes interest plus any prepaid finance charges (origination fees, points, certain other fees). APR is always equal to or higher than the interest rate.
APR is the apples-to-apples cost figure. A loan with a lower interest rate but a 5% origination fee can cost more than a loan with a slightly higher interest rate and no fee. APR captures the total cost; interest rate alone doesn't.