What is the difference between APR and interest rate?

The interest rate is the annual cost of borrowing the principal loan amount, expressed as a percentage. The Annual Percentage Rate (APR) is broader — it includes the interest rate plus lender fees, mortgage points, and other financing costs, giving a more accurate picture of the true cost of the loan. When comparing loan offers, always compare APRs rather than just interest rates. A loan with a lower interest rate but high fees can actually cost more over time than a loan with a slightly higher rate and minimal fees.