1-000-000-0000 BECOME A PARTNER
1-000-000-0000 BECOME A PARTNER
1-000-000-0000 BECOME A PARTNER
Interest Rate Vs. Annual Percentage Rate (APR)
Interest Rate Vs. Annual Percentage Rate (APR)
Interest Rate Vs. Annual Percentage Rate (APR)
Tools
Mortgage
Calculator

Estimate your monthly payment for a home purchase or refinance
Auto Loan
Calculator

Determine how much car you can afford before buying
Mortgage Loans

Learn about mortgage loans to find the one that's right for you
15 Year vs 30 Year
Loan Comparison

Compare payments between a 15 year and 30 year mortgage loan
Today's Mortgage
Rates

See today's current mortgage rates. Shop, compare and save.

October 3, 2010 (Jeff Alan)

One of the hardest things to understand, especially for first time homebuyers is the difference between what is the “interest rate” and what is the “annual percentage rate (APR). When evaluating loan offers it’s important to understand the difference between the interest rate and the Annual Percentage Rate because not knowing could end up costing you a lot of many in the long run.

Companies are required by law to post the APR next to the interest rate because the interest rate alone is not necessarily an accurate expression of a loan’s cost. A simple summary of the differences between the two rates is this:

The interest rate is the percentage of the loan amount that the bank is charging you to borrow money. The APR, by contrast, includes other costs of the loan (the upfront fees and any discount points) and calculates them as a yearly percentage of the loan amount. Because of this, APR is a more accurate representation of the true cost of a loan.

It is a good idea to compare the APR of different loan offers to get an idea of which loan has the larger overall cost. Let’s look a little closer…

One of the items that creates the biggest difference between the interest rate and the APR is discount points (pre-paid interest) also sometimes referred to as “points.” When you pay points, you are essentially paying the lender a portion of their interest income up front, in return for a lower interest rate over the life of the loan. A “point” equals 1 percent of the loan amount and will typically lower the interest rate by 0.125 percent. So if the interest rate is 6.5 percent, you could lower it to 6.375 percent by paying for one discount point.

Paying points is usually the largest fee associated with your loan. Depending on your financial situation you may choose or choose not to pay points. The more points you pay, the greater the difference between the interest rate and the APR, however, if you stay in your home for a long period of time, paying points will save you far more money in the long run. Your lender can give you a comparison.

The origination fee and any other lending fees — think of these as the lender’s service charges – are included in the APR calculation. These fees can rack up, so they can be a useful point of comparison when deciding between lenders. Some lenders have different fees or can charge more for the same fees, this would increase your loan costs, thus your APR would be higher. Private mortgage insurance (PMI), which most lenders require if you have a down payment of less than 20 percent of the home’s value, is also included in the APR equation. There are other fees to getting a loan as well, but since these are third-party fees — assessed by companies other than the lender — they are not included in the APR.

The costs included in the APR are spread across the entire term of the loan, in most cases thirty years. Since very few homeowners keep their mortgage this long, if you refinance or move in five to seven years, the mortgage with high up-front costs may turn out to be more expensive than the APR suggests.

FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.
Congratulations! With the great learning tools we provide for you at LoanRateNetwork and the offers you have received, you've found the right product and the best rate.
HOW LOANRATENETWORK
LOAN CENTER WORKS
LOANRATENETWORK
FAST & EASY. DATA ENCRYPTED
Applying to multiple lenders is fast and easy with our one simple questionnaire. Choose the product you’re looking for, take a few moments to answer a few questions and you’re on your way to saving.
NO OBLIGATION. NO HIDDEN FEES
Any of the services on our website are 100% free, there is no obligation to use our services or any hidden fees. We’re not loan brokers so we don’t charge broker fees like other websites.
NO SSN OR CREDIT CHECK
No SSN or credit check is necessary to use our services. We bring lenders to you so they can compete for your business and you save. That information only becomes necessary after you choose a lender.
Information You Can Use
Types of Mortgage Loans
Home Selling Tips
Mortgage
Calculator

Auto Loan
Calculator

Determine how much car you can afford before buying
Mortgage Loans

Learn about the different types of home loans
15 Year vs 30 Year
Loan Comparison

Compare 15 year and 30 year mortgage loans
Todays Mortgage
Rates

See today's mortgage rates. Shop, compare and save.

October 3, 2010 (Jeff Alan)

One of the hardest things to understand, especially for first time homebuyers is the difference between what is the “interest rate” and what is the “annual percentage rate (APR). When evaluating loan offers it’s important to understand the difference between the interest rate and the Annual Percentage Rate because not knowing could end up costing you a lot of many in the long run.

Companies are required by law to post the APR next to the interest rate because the interest rate alone is not necessarily an accurate expression of a loan’s cost. A simple summary of the differences between the two rates is this:

The interest rate is the percentage of the loan amount that the bank is charging you to borrow money. The APR, by contrast, includes other costs of the loan (the upfront fees and any discount points) and calculates them as a yearly percentage of the loan amount. Because of this, APR is a more accurate representation of the true cost of a loan.

It is a good idea to compare the APR of different loan offers to get an idea of which loan has the larger overall cost. Let’s look a little closer…

One of the items that creates the biggest difference between the interest rate and the APR is discount points (pre-paid interest) also sometimes referred to as “points.” When you pay points, you are essentially paying the lender a portion of their interest income up front, in return for a lower interest rate over the life of the loan. A “point” equals 1 percent of the loan amount and will typically lower the interest rate by 0.125 percent. So if the interest rate is 6.5 percent, you could lower it to 6.375 percent by paying for one discount point.

Paying points is usually the largest fee associated with your loan. Depending on your financial situation you may choose or choose not to pay points. The more points you pay, the greater the difference between the interest rate and the APR, however, if you stay in your home for a long period of time, paying points will save you far more money in the long run. Your lender can give you a comparison.

The origination fee and any other lending fees — think of these as the lender’s service charges – are included in the APR calculation. These fees can rack up, so they can be a useful point of comparison when deciding between lenders. Some lenders have different fees or can charge more for the same fees, this would increase your loan costs, thus your APR would be higher. Private mortgage insurance (PMI), which most lenders require if you have a down payment of less than 20 percent of the home’s value, is also included in the APR equation. There are other fees to getting a loan as well, but since these are third-party fees — assessed by companies other than the lender — they are not included in the APR.

The costs included in the APR are spread across the entire term of the loan, in most cases thirty years. Since very few homeowners keep their mortgage this long, if you refinance or move in five to seven years, the mortgage with high up-front costs may turn out to be more expensive than the APR suggests.

FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.
Congratulations! With the great learning tools we provide for you at LoanRateNetwork and the offers you have received, you've found the right product and the best rate.
HOW LOANRATENETWORK
LOAN CENTER WORKS
LOANRATENETWORK
FAST & EASY. DATA ENCRYPTED
Applying to multiple lenders is fast and easy with our one simple questionnaire. Choose the product you’re looking for, take a few moments to answer a few questions and you’re on your way to saving.
NO OBLIGATION. NO HIDDEN FEES
Any of the services on our website are 100% free, there is no obligation to use our services or any hidden fees. We’re not loan brokers so we don’t charge broker fees like other websites.
NO SSN OR CREDIT CHECK
No SSN or credit check is necessary to use our services. We bring lenders to you so they can compete for your business and you save. That information only becomes necessary after you choose a lender.
Information You Can Use
Types of Mortgage Loans
Home Selling Tips

October 3, 2010 (Jeff Alan)

One of the hardest things to understand, especially for first time homebuyers is the difference between what is the “interest rate” and what is the “annual percentage rate (APR). When evaluating loan offers it’s important to understand the difference between the interest rate and the Annual Percentage Rate because not knowing could end up costing you a lot of many in the long run.

Companies are required by law to post the APR next to the interest rate because the interest rate alone is not necessarily an accurate expression of a loan’s cost. A simple summary of the differences between the two rates is this:

The interest rate is the percentage of the loan amount that the bank is charging you to borrow money. The APR, by contrast, includes other costs of the loan (the upfront fees and any discount points) and calculates them as a yearly percentage of the loan amount. Because of this, APR is a more accurate representation of the true cost of a loan.

It is a good idea to compare the APR of different loan offers to get an idea of which loan has the larger overall cost. Let’s look a little closer…

One of the items that creates the biggest difference between the interest rate and the APR is discount points (pre-paid interest) also sometimes referred to as “points.” When you pay points, you are essentially paying the lender a portion of their interest income up front, in return for a lower interest rate over the life of the loan. A “point” equals 1 percent of the loan amount and will typically lower the interest rate by 0.125 percent. So if the interest rate is 6.5 percent, you could lower it to 6.375 percent by paying for one discount point.

Paying points is usually the largest fee associated with your loan. Depending on your financial situation you may choose or choose not to pay points. The more points you pay, the greater the difference between the interest rate and the APR, however, if you stay in your home for a long period of time, paying points will save you far more money in the long run. Your lender can give you a comparison.

The origination fee and any other lending fees — think of these as the lender’s service charges – are included in the APR calculation. These fees can rack up, so they can be a useful point of comparison when deciding between lenders. Some lenders have different fees or can charge more for the same fees, this would increase your loan costs, thus your APR would be higher. Private mortgage insurance (PMI), which most lenders require if you have a down payment of less than 20 percent of the home’s value, is also included in the APR equation. There are other fees to getting a loan as well, but since these are third-party fees — assessed by companies other than the lender — they are not included in the APR.

The costs included in the APR are spread across the entire term of the loan, in most cases thirty years. Since very few homeowners keep their mortgage this long, if you refinance or move in five to seven years, the mortgage with high up-front costs may turn out to be more expensive than the APR suggests.

HOW LOANRATENETWORK
LOAN CENTER WORKS
FILL OUT THE FORM
It all starts here. Select the loan product you want to apply for and complete the subsequent questionnaire.
WE VERIFY & TRANSMIT TO LENDERS
Once we receive your completed questionnaire we verify a couple vital pieces of information and direct your information to our network of lenders, all within minutes.