What is the Difference Between Interest Rates and APR?

Despite what some well-meaning people may tell you, there really is a difference between an interest rate vs APR (annual percentage rate). Understanding this difference is important. You don’t want to make any mistakes when calculating your loan costs. 

Two gray circles that say "interest rate" and "APR," with a diagonal line.

Interest Rates

An interest rate is essentially the cost of borrowing money for a particular length of time. It refers to the fee that a lender charges you on the borrowed capital. It is usually calculated as a fixed percentage of the principal amount. This rate is exclusive of any origination fees. Keep in mind, there could be other charges that the lender charges at the time of taking the loan. Additionally, fixed and variable interest rates exist. Federal student loans typically offer a fixed interest rate, which means your interest rate does not change over the loan’s lifetime. Private student loan lenders offer variable (as well as fixed) interest rates. A variable interest rate changes over your loan’s lifetime, and can be lower or higher than your original interest rate. 

College Ave company logo.

 A better student loan experience.

Variable rates as low as 1.19% - 11.98% APR with auto-debit

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APR also refers to the total cost of borrowing but the difference is it is expressed as an annual rate and takes into account all the charges and fees that the borrower pays at the time of taking out the loan, including origination, settlement, and closing fees if any.

It is useful for making more accurate comparisons between different loans as the calculation is done while factoring in the total cost of borrowing. The interest rate helps you calculate how much you will pay on the money you borrow. However,  it is not an effective tool for comparing different loans. It does not factor in the miscellaneous fees, which in fact adds to the total cost of the loan.

Use College Raptor’s free Student Loan Finder to compare lenders and interest rates side by side!



Lender Rates (APR) Eligibility
Sallie Mae logo.
1.62% - 11.73% Variable
3.75% - 12.85% Fixed
Undergraduate and Graduate
Credibe company logo.
0.94% - 11.98% Variable
2.99% - 12.99% Fixed
Undergraduate and Graduate
Lendkey company logo.
Undergraduate and Graduate
Ascent company logo.
1.47% - 9.05% Variable
3.97% - 11.89% Fixed
Undergraduate and Graduate
College Ave company logo.
1.19% - 11.98% Variable
3.49% - 12.99% Fixed
Undergraduate and Graduate
2.93% - 5.67% Variable
4.35% - 7.15% Fixed
Undergraduate and Graduate
Earnest company logo.
0.99% - 11.44% Variable
2.94% - 12.78% Fixed
Undergraduate and Graduate
1.30% - 11.52% Variable
3.20% - 11.99% Fixed
Undergraduate and Graduate
College Raptor is not a loan lender and does not assume responsibility for suggesting a loan to a user who may not be eligible for it. Rates, terms, conditions, eligibility, approval, and other considerations are the decisions of the lenders and may vary depending on which lender or marketplace the user selects. We urge users to carefully consider and review all loan options and terms before committing to taking out a loan.

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