The interest rate affects the monthly principal and interest payment. APR tries to express certain loan costs as an annualized cost, which can help comparisons when used carefully.
Key Takeaways
- Interest rate and APR are related, but not the same thing.
- APR can help compare cost, but only when loan terms are similar.
- Fees, credits, points, and timeline still need to be reviewed directly.
Interest rate
The interest rate is used to calculate the monthly principal and interest payment. It does not, by itself, show all upfront costs or credits.
APR
APR includes the interest rate plus certain finance charges. It can be useful, but it can also be confusing if two loans have different terms, credits, points, or expected hold periods.
How to compare
Look at rate, APR, lender fees, points, credits, cash to close, monthly payment, and how long you expect to keep the loan. The right structure is rarely decided by one number alone.
Rates, terms, and eligibility depend on credit profile, income, property, loan program, occupancy, market conditions, and underwriting approval.