Definition
APR
The Annual Percentage Rate expresses the total yearly cost of a loan — interest plus mandatory fees — as a single percentage, enabling apples-to-apples comparison of credit offers.
The APR bundles a loan's interest rate together with compulsory charges (like processing fees) into one annualised figure, so borrowers can compare offers that quote rates and fees differently. RBI's Key Fact Statement requires APR disclosure for retail and digital loans.
A loan can have a low headline interest rate but a higher APR once fees are included, which is why APR is the more honest cost measure. It does not, however, capture optional or contingent charges like late fees.
Comparing the APR across lenders helps you identify the genuinely cheaper loan rather than being misled by attractive-sounding interest rates alone.
Related terms
- Digital Lending GuidelinesRBI's Digital Lending Guidelines are rules that govern app- and platform-based lending in India to ensure transparency, fair practices and protection of borrowers' data.
- Key Fact Statement (KFS)A Key Fact Statement is a standardised, plain-language summary a lender must give a borrower showing the all-in cost of a loan, including the annual percentage rate and all charges.
- EMI ConversionEMI conversion lets a credit-card purchase or loan amount be repaid in fixed monthly instalments over a chosen tenure, usually with interest or a processing fee.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.