Compare APR to APR
The CFPB defines the interest rate as the cost you pay the lender for borrowing, and the APR as the interest rate plus additional lender fees, including origination charges. Its guidance, written for auto loans, is to compare APRs to APRs and not APRs to interest rates, and to shop more than one lender because lenders are not required to offer their best rates. [1]
A lower note rate can hide a higher total cost when a fee is involved. Write down for each offer: principal, note rate, APR, term, origination fee and whether it is withheld, cash you will actually receive, monthly payment and total of all payments. This is US consumer education, not personalized lending advice.
Three invented offers for the same $10,000 bill
All fixed-rate, 36 equal monthly payments. Amounts rounded to the cent.
| Measure | A: $10,000 at 12%, 5% fee withheld | B: $10,000 at 14%, no fee | C: $10,526.32 at 12%, 5% fee withheld |
|---|---|---|---|
| Cash received | $9,500 | $10,000 | $10,000 |
| Covers a $10,000 bill? | No, $500 short | Yes | Yes |
| Monthly payment | $332.14 | $341.78 | $349.62 |
| Total of payments | $11,957.15 | $12,303.95 | $12,586.48 |
| Cost above cash received | $2,457.15 | $2,303.95 | $2,586.48 |
What the table shows
Offer A has the lowest payment and lowest note rate, but it does not fund the bill. To net $10,000 with a 5% fee withheld you would need to borrow $10,000 divided by 0.95, about $10,526.32 (Offer C), which raises the payment to $349.62. Do not assume a lender will offer that exact amount.
Against C, Offer B delivers the same cash, costs $7.84 less a month and $282.53 less in total, despite the higher note rate. That is why the APR, which folds in the fee, is the fairer starting comparison. Our calculator asks for the note rate and fee separately; entering an APR there would count the fee twice.
The model keeps full precision and rounds for display. Lenders may use daily interest, different first-payment dates or different rounding, so their final disclosures are authoritative.
Offer review checklist
Use the worksheet's blank rows for real offers; keep account numbers out of it.
- Note rate and APR recorded separately; compare APR with APR.
- Fee withheld, paid separately, or added to the balance?
- Cash received covers the actual need.
- Monthly payment fits your budget with room for a bad month.
- Total of payments compared at the same term.
- Prepayment penalty, late fees and payment-date rules read directly.
- Fixed or variable rate; this model covers fixed only.
Questions before you decide
Is APR the same as the interest rate?
No. The CFPB says APR is the interest rate plus additional lender fees such as origination charges. Compare APR with APR, not APR with an interest rate.
Why is cash received less than the loan amount?
When an origination fee is withheld, you receive principal minus the fee. A $10,000 loan with a 5% withheld fee delivers $9,500.
Is a lower interest rate always cheaper?
No. In our invented comparison, a 14% loan with no fee costs $282.53 less than a 12% loan with a 5% fee when both deliver $10,000 in cash over 36 months.
Follow the sources
- CFPB: loan interest rate versus APR Checked Oct 29, 2026
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