APR stands for annual percentage rate and its
purpose is to give borrowers a truer representation of the effective interest
rate on their loan. APR factors in certain closing costs and fees and spreads
these costs over the life of the loan, along with the note rate, to arrive at a
more accurate annualized percentage rate than the note rate alone represents.
California Department of Real Estate definition: Annual Percentage Rate (APR) - The annual percentage rate (APR) of interest includes both the simple interest rate and certain fees, commissions, costs, and expenses. By contrast, the simple interest rate, or note rate, does not include these costs and fees. If a broker or lender quotes an interest rate to you, be sure to ask if that rate is the simple rate or the APR. Use the APR to compare loans which have different simple interest rates, points and other loan charges. The loan with the higher APR may cost you more over the term of the loan.