What is the difference between APR and interest rate on a personal loan?

Why the distinction matters: Two loans with the same 10% interest rate can have very different real costs if one charges a 3% origination fee and the other charges nothing. APR folds that fee into the rate math so you see the true cost of each option side by side.

Formula: APR accounts for the interest rate plus any fees charged at origination, spread over the loan term. A $10,000 loan at 10% interest with a $300 origination fee has an APR slightly above 10% because you are paying $300 upfront for $9,700 in actual proceeds.

Federal disclosure requirement: Under the Truth in Lending Act (TILA), lenders must disclose APR before you sign. It appears on your loan estimate and on the loan agreement.

When the gap between interest rate and APR is large: A big spread (more than 1-2 percentage points) signals a heavy origination fee. Some lenders advertise a 9.9% interest rate with a 6% origination fee, making the true APR much higher. Compare the APR, not the headline rate.

No-fee loans: Some lenders (LightStream, for example) charge no origination fee. For these, the interest rate and APR are identical or nearly so.

Shopping advice: Use APR as your primary comparison metric across all lenders. Then, within similar APRs, check the term length and monthly payment to confirm affordability.