What is the APR on a personal loan?

Core Concept - The primary distinction between APR and interest rate is that APR encompasses all costs associated with a loan, while the interest rate solely reflects the monthly percentage charged on the borrowed amount [1][5]. Group 1: Understanding APR - APR reflects the total cost of borrowing, combining the interest rate with additional fees such as origination fees [5][6]. - A significant difference between the quoted interest rate and APR may indicate high fees from the lender [4][6]. - Many lenders provide APRs online, facilitating easier comparisons before applying for loans [5][10]. Group 2: Calculating APR - To calculate APR, lenders start with the offered interest rate and add relevant finance charges, including origination and administrative fees [3][6]. - The calculation involves expressing the interest rate as a decimal, multiplying by the loan term in years, and adjusting for the number of days in the loan term [2][18]. Group 3: Factors Influencing APR - Factors impacting a loan's APR include credit score, income, debt-to-income ratio, loan term, and lender policies [20][21]. - Borrowers with higher credit scores typically secure lower APRs, while those with poor credit may face rates as high as 36% [14][15]. - Shorter repayment terms generally result in lower APRs, although monthly payments may be higher [20][21]. Group 4: Average and Good APRs - The average APR for personal loans is reported to be 12.21%, with rates ranging from approximately 7% to 36% [13]. - A good APR is typically below the national average, often requiring a credit score above 670 [10][19].