An APR is an Annual Percentage Rate also known as the "contracted interest rate/nominal interest rate". This rate is what you are told is the amount of interest that you will pay on your debt. Congress made it so that lenders are required to disclose this rate to protect consumers from unfair credit practices. This requirement is part of the Truth in Lending Act which requires that all terms of the financing are laid out and transparent. The APR is different than the Effective Interest Rate. The Effective Interest Rate is what your true interest is that you will be paying. These differ as the actual amount paid in interest may be different between two lenders, depending on the terms of the agreement. The banks may claim the same interest rate, but they may have different terms on the interest. If this is the case, then the amount paid in interest will differ between the two lenders. When comparing the two lenders you would use the APR/Nominal Rate to compare the cost of the loans if the terms of payment are the same. If the terms are different, for example, one is semiannual and one is daily compounding your figures will be skewed and inaccurate. Do you agree? Give feedback