Calculate the true Annual Percentage Rate including fees and charges
The interest rate is what you pay to borrow money. The APR (Annual Percentage Rate) includes the interest rate plus fees and charges, giving you the true cost of borrowing. A loan with a 6.5% rate and high fees might have a 6.8% APR, making it more expensive than a 6.6% loan with low fees.
When comparing loan offers, the APR is more useful than the stated interest rate because it accounts for the total cost. Federal law requires lenders to disclose the APR so borrowers can make apples-to-apples comparisons.