What APR really expresses (first half). APR is an annualized percentage intended to help consumers compare the cost of credit by combining the nominal interest rate with certain required fees (like origination or finance charges) into a single annual figure. It’s not the monthly periodic rate (though the APR is often derived from monthly compounding behavior), and it’s not a literal dollar total you’ll pay — rather, it’s an apples-to-apples headline rate that exposes fees that would otherwise hide in separate line items. Because APR is standardized by regulation in many jurisdictions, it’s a useful first-pass comparison tool across lenders and loan products.

Limitations and what to check next (second half). APR can differ between lenders even if monthly payments look similar, because APR includes certain fees while excluding optional costs. It also may not fully reflect compounding differences, late fees, or penalties. When comparing offers, use APR to screen, but then read the loan agreement for financed fees, prepayment penalties, the compounding period, and whether required products (insurance, membership) are bundled. For credit cards, promotional rates (0% balance transfer) may have low or zero APR for a period, after which the regular APR applies — factor those transitions into your plan.