APR Versus Interest Rates:  What's the Difference?


What’s the difference? In a nutshell - transparency. The Annual Percentage Rate (APR) provides you the full view on the total cost of your loan, and includes your interest rate and relevant fees. The interest rate only includes the percentage you are charged to borrow money, and unlike APR, leaves out other finance charges incurred as part of the loan.


Your interest rate is the base cost of borrowing money for the duration of your loan, and is a percentage of the principal loan amount. It can be fixed (it will not change) or variable (it could change over time). All Skills Fund loans are fixed – your rate will not go up. An interest rate is shown as a percentage, but does not include additional finance charges that will also be incurred. It gets tricky because some lenders try to add lots of fees that increase the cost of the loan even if the interest rate is low.


The Annual Percentage Rate (APR) is the big picture on your loan. It outlines the annual cost of your loan, and includes the origination fee, financing charges, capitalized interest, and the interest rate to reflect the total cost of the loan. Like a stand-alone interest rate, it’s shown as a percentage.

The Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR, and is a great way to gauge how much you will pay to borrow money from a lender.

THE MORE YOU KNOW: a Skills Fund loan discloses all of these details upfront. You’ll know your origination fee, fixed interest rate, and the term of your loan – your APR – before applying. How easy is that?

QUESTIONS? Contact info@skills.fund at anytime!