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

Simple vs full cost: Interest rate: the pure cost of the borrowed money, expressed as a percentage per year. If you borrow $10,000 at 12% interest, you accrue $1,200 in interest in year 1 (before any principal payments). APR: required by the Truth in Lending Act to include the interest rate plus any fees that are part of the credit transaction. For a personal loan with a 3% origination fee, the APR is higher than the stated interest rate because the fee increases your cost without increasing the amount you receive.

Example with origination fee: Loan amount: $10,000. Interest rate: 12%. Origination fee: 3% ($300). Net proceeds: $9,700. APR: approximately 13.7% (because you paid $300 for effectively borrowing $9,700, and the fee affects the cost of the entire loan term). This is why comparing APRs (not interest rates) across lenders is essential. A lender advertising '10% APR, no origination fee' may be cheaper than one advertising '9% interest rate with 4% origination fee.'

When they are equal: If the lender charges no origination fee and no other upfront fees included in the finance charge calculation, then APR = interest rate. This is common at LightStream, Marcus, SoFi, and Discover - which is why they advertise APR prominently.

APR does not include: Optional products (credit insurance, gap coverage). Late fees (these are not predictable at origination). Returned payment fees. These costs affect the true cost of your loan but are excluded from the APR calculation by regulation.