Annual Percentage Rate is a rate, which is expressed as a yearly percentage rate and is a measure of the total cost of credit i.e. interest as well as other recurring charges. It is also known as APR.

Objective of annual percentage rate is to provide 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 an accurate annualized percentage rate.