What’s so difficult about comparing Annual Percentage Rates (APR)?
Your “note rate”, i.e. 8%, is used to calculate your interest on principal, and by extension, your monthly payments. The annual percentage rate (APR) is a slightly higher number, intended to reflect more complicated costs associated with the loan above and beyond the note rate. The Federal Truth in Lending law requires lenders to disclose the APR along with the note rate, to protect the consumer from hidden fees.