The annual percentage rate (APR) expresses the ratio of all loan-related costs.
The calculation includes the loan amount, origination fee, interest rate and other costs such as property insurance, land register fee, property appraisal fee, and similar fees.
In addition to the interest rate, the origination fee, appraisal, application for the registration of lien, property insurance and other loan-related fees are included.
The interest rate is one of the values that are part of the APR calculation and represents a percentage interpretation of the price for the loan amount.
For example: The interest rate determines the amount of interest included in the monthly installment and represents a cost for the borrower. The interest cost along with additional costs is recalculated into the APR percentage to enable a comparison of the total loan-related costs with various loan structures. For example, if you compare a loan with an interest rate of 1.35% and APR of 2.10% and a loan with an interest rate of 1.55% and APR of 1.85%, you can see that you will actually pay less for the loan with the APR of 1.85% even if it has a higher interest rate. With the first loan you will pay less in interest but the other costs, such as insurance, origination fee, etc. are so high that the second loan with the APR of 1.85% is better for you even with the higher interest rate.