How to Compare APR Rates: What to Know Before You Borrow

When you’re shopping for a personal loan, the number that usually jumps out first is the interest rate. But there’s another number that matters just as much—if not more—when you’re comparing offers: the APR.

APR stands for Annual Percentage Rate, and it’s one of the most important tools you have to understand the real cost of borrowing. Still, it’s often misunderstood or buried in fine print. If you’re new to the U.S. credit system—or just trying to make a smart financial decision—knowing how to read and compare APRs can save you hundreds or even thousands of dollars over the life of a loan.

What Is APR?

APR is a broader measure than just the interest rate. It includes the interest charged on the loan plus most fees, such as origination fees, administrative charges, and other costs associated with borrowing.

If two loans have the same interest rate but one has more fees, the APR will be higher. That’s why comparing interest rates alone can be misleading. APR gives you a clearer picture of what you’ll actually pay over time.

Why APR Is Better for Comparing Personal Loans

Let’s say you’re offered two personal loans:

• Loan A has a 9.9% interest rate and a $250 origination fee
• Loan B has a 10.5% interest rate but no fees

At first glance, Loan A might seem cheaper. But once you include the upfront fee, the APR could be higher than Loan B. If you’re borrowing a small amount or planning to repay quickly, fees can make a big difference in what you actually pay.

That’s why responsible lenders display both the interest rate and the APR. If a lender only advertises the interest rate without mentioning APR, be cautious—it could mean there are hidden costs.

What’s Considered a Good APR?

There’s no one-size-fits-all answer. A “good” APR depends on your credit history, income, loan amount, and term length. That said, here’s a general range for unsecured personal loans in the U.S.:

• Excellent credit: 6–10% APR
• Average credit: 10–20% APR
• Limited or no credit: 20–30%+ APR

If you’re new to the country or don’t have a U.S. credit score, you will generally receive higher APR offers—but it’s still worth comparing multiple lenders to find the best combination of rate, fees, and terms.

LendKoi was created to get these APRs lower for those with limited or no credit, especially those who are new to the USA with interest rates as low as 12.99%APR for expats and immigrants.

What to Look For When Comparing APRs

If you’re comparing loan offers, here’s what to pay attention to—beyond just the percentage:

• Term length: A lower APR on a longer loan might cost more in total interest. Always check what the monthly payment will be and how much you’ll pay overall.
• Fixed vs. variable APR: Fixed means your rate won’t change over time. Variable can start lower, but could increase, especially in a rising interest rate environment.
• Fees included: Make sure the APR includes all mandatory fees. If a lender charges additional fees not reflected in the APR, you’re not seeing the full cost.
• Prepayment penalties: A loan with a slightly higher APR but no penalty for paying off early might save you money in the long run

Transparency matters as much as numbers. If you can’t easily find or understand the APR, that’s a red flag.

What About 0% APR Offers?

Some lenders or credit cards advertise 0% APR promotions. These can be great if used correctly—but always read the fine print.

Many of these offers are introductory rates, meaning the 0% applies only for a set period (often 6–18 months). After that, the rate can jump significantly. If you don’t pay off the full balance before the promotion ends, you could end up paying deferred interest on the entire amount.

Used strategically, these offers can be helpful—but they’re rarely a long-term solution. For personal loans, you can assume that there is going to be fine print that you need to read carefully, so stick to companies that keep their rates clean and visible.

Understanding APR is about more than just financial literacy—it’s about protecting your future self. Loans aren’t just a number on a screen; they’re a commitment. Knowing how to compare APRs gives you the power to make that commitment on your terms, with full clarity about the cost.