What's the significance of APR when comparing loans?

The APR represents the true annual cost of borrowing, including both interest and fees. It allows you to accurately compare quotes from different lenders.

Loans with lower APRs typically have lower interest rates and fees, making them more affordable over the full repayment period. Even small APR differences of 0.5% or less can amount to thousands of rupees over the entire tenure of a loan. When deciding between a 15-year and 30-year mortgage, for example, the loan with the lower APR will have lower total costs in the long run.

However, APR should not be the only consideration. You also need to look at the loan amount, term length, additional fees not included in APR, and early repayment options. But keeping the APR low ensures manageable interest costs.

Evaluating loans based on APR alongside other factors will help you secure the most favourable interest rate and fees for your situation. It is an indispensable tool for loan comparison. You can also use an APR calculator by entering the loan amount, interest rate, loan tenure and loan origination charges to know the APR interest.