Definition
The yearly cost of borrowing, including interest and certain fees, expressed as a percentage. Use APR to compare loans and credit cards; the higher the APR, the faster a balance grows against you.
Why it matters
APR is the honest price tag on debt and the single best way to rank which balance to attack first. A few points of APR difference compounds into thousands of dollars over a loan's life.
Example
A $5,000 credit card balance at 22% APR accrues roughly $92 of interest in a single month if unpaid. The same $5,000 on a 7% personal loan costs about $29 a month, a third of the price for the same debt.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.