An interest rate refers to the interest charged on a loan, and it does not take any other expenses into account. In contrast, APR is the combination of loan fees (certain closing costs, discount, etc.) and the interest rate. As a result, APR tends to be higher than a loan’s nominal interest rate. For example, a loan with an interest rate of 4.5% with loan costs of $7,000 would have an APR of approximately 5.61%. This is the cost over the loan term expressed as a rate. This is notthe interest rate, and is not used in calculation of the monthly principal and interest repayment amount.