Definition: An annualized measure intended to help borrowers compare the cost of credit.
In plain words
APR (annual percentage rate) shows the yearly cost of credit as a percentage, so you can compare loans of different sizes and lengths.
Why it matters
A flat fee can look small in dollars but be very expensive over a short time. APR puts different offers on the same yearly scale. Which fees count toward APR depends on the disclosure law that applies, so always check total dollars too.
Example
Illustrative example: A $15 fee on a $100 loan repaid in 14 days: (15 ÷ 100) × (365 ÷ 14) × 100 ≈ 391% APR. A $1,000 loan costing $100 over a full year is 10% APR. The first loan costs less in dollars but much more per day.
Always read the term in the context of your own agreement and local law.
Related terms and guides
Finance charge · APR calculator · APR and fees explained